The growing demand for environmentally friendly and sustainable materials has led to the invention of innovative solutions aiming to reduce negative impacts on the environment. Mycelium-based green composites (MBCs) have become an alternative to traditional materials due to their biodegradability and various potential uses. Although MBCs are accepted as modern materials, there are concerns related to some of their physical and mechanical properties that might have limitations when they are used. This study investigates the effects of using paper waste to improve MBC properties. In this study, we investigated the physical and mechanical properties of MBCs produced from lignocellulosic materials (corn husk and sawdust) and mushroom mycelia of the genus Lentinus sajor-caju TBRC 6266, with varying amounts of paper waste added. Adding paper waste increases the density of MBCs. Incorporating 20% paper waste into corn husks led to the enhancement of the compression, bending, and impact strength of MBCs by over 20%. Additionally, it was also found that the MBCs produced from corn husk and 10% paper waste could help in reducing the amount of water absorbed into the material. Adding paper waste to sawdust did not improve MBC properties. At the same time, some properties of MBCs, such as low tensile strength and high shrinkage, might need to be further improved in the future to unlock their full potential, for which there are many interesting approaches. Moreover, the research findings presented in this publication provide a wealth of insightful information on the possibility of using paper waste to improve MBC performance and expand their suitability for a range of applications in sustainable packaging materials and various home decorative items. This innovative approach not only promotes the efficient utilization of lignocellulosic biomass but also contributes to the development of environmentally friendly and biodegradable alternatives to traditional materials.