Because of their lightweight structure, flexibility, and immunity to electromagnetic interference, polymer optical fibers (POFs) are used in numerous short‐distance applications. Notably, the incorporation of luminescent nanomaterials in POFs offers optical amplification and sensing for advanced nanophotonics. However, conventional POFs suffer from nonsustainable components and processes. Furthermore, the traditionally used luminescent nanomaterials undergo photobleaching, oxidation, and they can be cytotoxic. Therefore, biopolymer‐based optical fibers containing nontoxic luminescent nanomaterials are needed, with efficient and environmentally acceptable extrusion methods. Here, such an approach for fibers wet‐spun from aqueous methylcellulose (MC) dispersions under ambient conditions is demonstrated. Further, the addition of either luminescent gold nanoclusters, rod‐like cellulose nanocrystals or gold nanocluster‐cellulose nanocrystal hybrids into the MC matrix furnishes strong and ductile composite fibers. Using cutback attenuation measurement, it is shown that the resulting fibers can act as short‐distance optical fibers with a propagation loss as low as 1.47 dB cm−1. The optical performance is on par with or even better than some of the previously reported biopolymeric optical fibers. The combination of excellent mechanical properties (Young's modulus and maximum strain values up to 8.4 GPa and 52%, respectively), low attenuation coefficient, and high photostability makes the MC‐based composite fibers excellent candidates for multifunctional optical fibers and sensors.