The construction industry's rapid expansion has led to the accumulation of substantial quantities of waste concrete powder (WCP), which constitutes a significant portion of construction and demolition waste. This study seeks to explore the potential of utilizing WCP in conjunction with cement to manufacture compressed stabilized earth blocks (CSEB) with enhanced mechanical properties. CSEB has long been recognized as an environment-friendly and viable alternative to traditional building blocks that harm the environment. By incorporating WCP into the production process, we can achieve recyclability and sustainability in our construction practices. In order to identify the optimal amount of stabilizers, 15 different combinations of cement and WCP were considered. These included three cement contents (4%, 6%, and 8% by weight of dry soil) and five waste concrete powder (WCP) contents (0%, 5%, 10%, 15%, and 20% by weight of dry soil). Compressed stabilized earth blocks (CSEB) performance was evaluated in terms of strength, durability, and thermal properties. Strength characteristics were determined through unconfined compression and flexure tests, while durability characteristics were evaluated using water absorption, wet compressive strength, submersion, and efflorescence tests. CSEBs without WCP displayed a maximum dry compressive strength of 6.67 MPa, while those with optimal WCP replacement reached a higher strength of 10.68 MPa using the same cement amount. Comparable outcomes were seen in the flexure test, with optimal WCP replacement resulting in a peak strength of 1.92 MPa compared to 1.12 MPa without WCP. In terms of durability, WCP-absent samples showed 13% water absorption, reduced to 10.5% with higher WCP content. Wet compressive strength was relatively lower for all samples, but those with optimal WCP performed best at 4.83 MPa. These fabricated samples also exhibited no efflorescence or damage from submersion. Thermal conductivity, determined using the simplified Lee's method, demonstrated a gradual increase in conductivity as WCP content was increased. However, the obtained values remained within comparable range of fired clay bricks. Furthermore, to investigate the supplementary cementitious behavior of WCP in CSEB, microstructural and thermal analyses were conducted. Scanning electron microscope images revealed a higher concentration of C–S–H gels in the 20% WCP-8% cement combination. The findings suggest that CSEB blocks stabilized with WCP could help to reduce construction and demolition waste while also providing a more stable and sustainable alternative to traditional building blocks.