Textile waste has emerged as a critical global challenge, with improper disposal practices leading to adverse environmental consequences. In response to this pressing issue, there is growing interest in recycling textile waste containing cellulose as an alternative approach to reducing the impact of industrial waste on the environment. The objective of this research is to investigate the extraction and characterization of nanocellulose from polyester–cotton textile waste as a potential solution to address the growing concerns of waste management in the textile industry. To obtain nanocellulose, a comprehensive process involving alkaline sodium hydroxide (NaOH) treatment of the polyester–cotton textile (35% PET and 65% cotton) was employed, resulting in average yield percentages ranging from 62.14% to 71.21%. To achieve the complete hydrolysis of PET polyester in the blends, second hydrolysis was employed, and the optimized condition yield cotton fiber was 65.06 wt%, relatively close to the theoretical yield. Subsequently, the obtained cellulosic material underwent an acid hydrolysis process using 70 percent (v/v) sulfuric acid (H2SO4) solution at 45 °C for 90 min, resulting in nanocellulose. Centrifugation at 15,000 rpm for 15 min facilitated the separation of nanocellulose from the acid solution and yielded 56.26 wt% at optimized conditions. The characterization of the nanocellulose was carried out utilizing a comprehensive array of techniques, including absorption, transmission, and reflection spectra, and Fourier transform infrared. The characterization results provide valuable insights into the unique properties of nanocellulose extracted from textile waste. In this research, the obtained nanocellulose was mixed with PVA and silver nanoparticle to form biodegradable film composites as the reinforcement. In comparison, biodegradable film of PVA:nanocellulose 9.5:0.5 with silver nanoparticle 0.3 wt% and glycerol as a plasticizer exhibits better tensile strength (2.37 MPa) and elongation (214.26%) than the PVA film with normal cellulose. The prepared biodegradable film was homogeneous and had a smooth surface without the internal defect confirmed by the CT scan. This result opens avenues for enhancing the quantities of eco-friendly film composites, potentially replacing conventional plastic films in the future.