Sustainable food packaging paper with high barrier and strength properties was developed with rice straw nanocellulose materials. Pulping and bleaching of rice straw were performed using an organosolv pulping and DED (D: chlorine dioxide bleaching; E: sodium hydroxide extraction) bleaching sequence. Bleached rice straw pulp was refined to 90°SR using a laboratory Valley beater. The laboratory handsheets were prepared using pulp slurry at 40°SR and 90°SR. The handsheets of cellulose nanofibrils (CNFs) made of highly refined pulp (90°SR) were surface sized using alkyl ketene dimer (AKD) wax to increase the barrier properties of paper for selective food packaging applications. The paper samples were tested for mechanical, optical, surface, and barrier properties, including tensile index, burst index, tearing index, bending stiffness, elongation, porosity, apparent density, opacity, Cobb value, water vapor transmission rate (WVTR), oil and grease resistance, and contact angle. The refined pulp (90°SR) was analyzed using field-emission scanning electron microscopy (FE-SEM), and it was observed that the morphology of the developed fibers changes to the nanoscale (<100 nm) for at least one dimension. The particle size distribution of the refined pulp using DLS analyzer also confirmed the cellulose fibers to near nanoscale. It was concluded that nanofibers were formed by a high degree of the mechanical pulp refining process and found to be much more economical than alternative processes in this direction. The sample handsheets of CNFs showed good strength and barrier properties. The barrier properties further increased when surface sizing was done using low-cost, nontoxic, and biodegradable AKD wax.