This study introduces the development of a novel bio-nano composite via the dispersion of cellulose nanofibers (CNF) in epoxy. The surface of cellulose nanofibers was functionalized using a two-step chemical treatment to enhance dispersion. The interfacial characteristics of CNF were improved using alcohol/acetone treatments. The modified CNF (M-CNF) demonstrated enhanced compatibility and improved dispersion in the epoxy matrix as evidenced by scanning electron microscopy. Based on the analysis of X-ray diffraction patterns, M-CNF did not disturb the crystalline phases at the interface. The results of mechanical testing showed that M-CNF worked as a reinforcing agent in the bio-nano composite. The flexural modulus increased from 1.4 to 3.7 GPa when M-CNF was introduced. A similar trend was observed for tensile strength and impact resistance. The optimum performance characteristics were observed at M-CNF of 0.6%. At higher dosages, some agglomeration was observed, which weakened the interfacial properties. This study promotes sustainability and resource conservation while offering CNF as a sustainable reinforcing agent to develop bio-nano composites.