Due to the requirement for developing more sustainable constructions, natural fibers from agricultural wastes, such as coir fibers, have been increasingly used as an alternative in concrete composites. However, the influence of coir fibers on the hydration and shrinkage of cement-based materials is not clear. In addition, limited information about the reinforcing mechanisms of coir fibers in concrete can be found. The goal of this research is to investigate the effects of coir fibers on the hydration reaction, microstructure, shrinkages, and mechanical properties of cement-based light-weight aggregate concrete (LWAC). Treatments on coir fibers, namely Ca(OH)2 and nano-silica impregnation, are applied to further improve LWAC. Results show that leachates from fibers acting as a delayed accelerator promote cement hydration, and entrained water by fibers facilitates cement hydration during the whole process. The drying shrinkage of LWAC is increased by adding fibers, while the autogenous shrinkage decreases. The strength and toughness of LWAC are enhanced with fibers. Finally, three reinforcement mechanisms of coir fibers in cement composites are discussed.