Advances in waste-to-energy technology and sustainable fuel production drive significant changes in the energy industry. These innovative solutions not only address waste management challenges but also contribute to broadening the energy source matrix and reducing dependence on traditional fossil fuels. This study evaluates the incorporation of polyethylene and polypropylene urban plastic waste in various agro-industrial by-product blends, which combine beet pulp, radiata pine, and eucalyptus bark wastes. The generation of the hybrid biofuel from agro-industrial waste and domestic solid waste in pellet form is investigated to determine the optimal blends in terms of durability, ash generation and calorific value. Both urban plastics incorporated in the mixtures not only significantly increase the calorific energy value but also promote the binding of the solid biofuel components. The polypropylene-based urban plastic pellet exhibited superior binding capacity and lower ash generation, even in complex hydroxyl functional groups. It also displayed suitable properties for solid biofuels, such as low fine content, high durability, and dimensional stability. The highest resulting calorific value of 22.6 MJ/kg was determined for the mass ratio of the blend with 99% durability, 0.23% fines content, and 5.1% combustion ash generation. This new hybrid biofuel is presented as a sustainable option and a significant contribution in the field of waste-to-energy technology and renewable energy production. The production cost of the hybrid biofuel is competitive with wood-based biofuels, with only a 6.25% increase observed for pellets made from 50% wood and 20% beet pulp compared to traditional 100% wood pellets. However, significant cost reductions were achieved through specific configurations, resulting in savings of 14.8%. The novel hybrid biofuel requires only 9.2 MJ/kg to produce 22.6 MJ/kg, demonstrating significant energy impact and viability as a sustainable energy source in waste-to-energy technology and renewable energy production.