Cement-bonded particle boards are gaining popularity globally due to their durability, strength, and, more importantly, environmental sustainability. The increasing demand for these materials has also created the necessity for the sustainable recycling of these materials. In this study, the potential to recycle wood-wool cement board (WWCB) waste into new lightweight insulation biocomposite material was examined. The waste WWCBs were crushed and separated into a fine aggregate fraction, and WWCB production line residues were also collected and compared. The crushed WWCBs were used to produce biocomposites with various compaction ratios and different binder-to-aggregate ratios. To improve their thermal properties and reduce their density, hemp shives were used to partially replace the recycled WWCB aggregate. Their physical, mechanical (compressive and flexural strength), and thermal properties were evaluated, and the drying process of the biocomposites was characterized. The results showed that the density of the produced biocomposites ranged from 390 to 510 kg/m3. The reduction in density was limited due to the presence of cement particles in the aggregate. The incorporation of hemp shives allowed us to reduce the density below 200 kg/m3. The thermal conductivity of the biocomposites ranged from 0.054 to 0.084 W/(mK), placing the material within the effective range of natural biocomposites. This research has demonstrated that industrially produced WWCBs can be successfully recycled to produce sustainable lightweight cement-bonded insulation materials.