Addressing the impacts of climate change and global warming has become an urgent priority for the planet’s well-being. In recent decades the great potential of fungal-based products with characteristics equal to, or even outperforming, classic petroleum-derived products has been acknowledged. These new materials present the added advantage of having a reduced carbon footprint, less environmental impact and contributing to the shift away from a fossil-based economy. This study focused on the production of insulation panels using fungal mycelium and lignocellulosic materials as substrates. The process was optimized, starting with the selection ofTrametes versicolor,Pleurotus ostreatus,P. eryngii,Ganoderma carnosumandFomitopsis pinicolaisolates, followed by the evaluation of three grain spawn substrates (millet, wheat and a 1:1 mix of millet and wheat grains) for mycelium propagation, and finishing with the production of various mycelium-based composites using five wood by-products and waste materials (pine sawdust, oak shavings, tree of heaven wood chips, wheat straw and shredded beech wood). The obtained biomaterials were characterized for internal structure by X-ray micro-CT, thermal transmittance using a thermoflowmeter and moisture absorption. The results showed that using a wheat and millet 1:1 (w/w) mix is the best option for spawn production regardless of the fungal isolate. In addition, the performance of the final composites was influenced both by the fungal isolate and the substrate used, with the latter having a stronger effect on the measured properties. The study shows that the most promising sustainable insulating biomaterial was created usingT. versicolorgrown on wheat straw.