Utilizing plant-based resources, particularly their by-products, aligns with sustainability principles and circular bioeconomy, contributing to environmental preservation. The therapeutic potential of plant extracts is garnering increasing interest, and this study aimed to demonstrate promising outcomes from an extract obtained from an underutilized plant waste. Chaetomorpha linum, an invasive macroalga found in the Orbetello Lagoon, thrives in eutrophic conditions, forming persistent mats covering approximately 400 hectares since 2005. The biomass of C. linum undergoes mechanical harvesting and is treated as waste, requiring significant human efforts and economic resources—A critical concern for municipalities. Despite posing challenges to local ecosystems, the study identified C. linum as a natural source of bioactive metabolites. Phytochemical characterization revealed lipids, amino acids, and other compounds with potential anti-inflammatory activity in C. linum extract. In vitro assays with LPS-stimulated RAW 264.7 and TNF-α/IFN-γ-stimulated HaCaT cells showed the extract inhibited reactive oxygen species (ROS), nitric oxide (NO), and prostaglandin E2 (PGE2) productions, and reduced inducible nitric oxide synthase (iNOS) and cyclooxygenase-2 (COX-2) expressions via NF-κB nuclear translocation, in RAW 264.7 cells. It also reduced chemokines (TARC/CCL17, RANTES/CCL5, MCP-1/CCL2, and IL-8) and the cytokine IL-1β production in HaCaT cells, suggesting potential as a therapeutic candidate for chronic diseases like atopic dermatitis. Finally, in silico studies indicated palmitic acid as a significant contributor to the observed effect. This research not only uncovered the untapped potential of C. linum but also laid the foundation for its integration into the circular bioeconomy, promoting sustainable practices, and innovative applications across various industries.