Cellulosic wastes represent a great environmental challenge, with potential conversion to product-added value through microbial fermentation. Currently, bacterial cellulose (BC) is considered a promising natural polymer for multiple applications. However, the high production cost challenges its wide application. Hence, the current study evaluated the applicability of paper sludge as a cost-effective medium for both cellulases and BC production. The local isolate Streptomyces rochei revealed the highest cellulase production titer (about 3 U/mL) at optimized conditions. For BC production, batch and fed-batch fermentation strategies were evaluated using enzymatically hydrolyzed paper sludge. The results asserted the advantage of fed-batch fermentation for advanced BC production (3.10 g/L) over batch fermentation (1.06 g/L) under the same cultivation conditions. The developed BC membranes were characterized through different instrumental analyses, which revealed an increase in fiber diameters and crystallinity under fed-batch fermentation. Furthermore, BC/magnetite (BC/Fe3O4) nanocomposite was developed by an in-situ approach. The newly developed composite was evaluated for dye removal applications, using methyl orange (MO) as a model. The dye removal conditions were optimized through Box Behnken design (BBD), which indicated maximal MO removal (83.5%) at pH 3.0 and BC/Fe3O4 concentration of 0.1 mg/dL after 60 min. Therefore, the current study asserts the good applicability of enzymatically hydrolyzed paper sludge as a medium for cost-effective BC production and the high capacity of BC/magnetite nanocomposite for MO decolorization. The study paves the way for the cost-effective implementation of BC/magnetite nanocomposite for dye removal.Graphical