In this study, the potential of alfalfa pulp as an alternative substrate to wheat straw for the cultivation of oyster mushroom (Pleurotus ostreatus) was investigated. The major components associated with different mushroom stages were evaluated, as well as changes in lignocellulolytic enzyme activities in substrates composed of alfalfa pulp, wheat straw or a combination of both. Based on the results, alfalfa pulp was demonstrated to be a better substrate than wheat straw for the production of oyster mushrooms, with a high biological efficiency of 166.3 ± 25.4%. Compared to the cultivation period on commercial straw (31 days), a shorter lifecycle for oyster mushroom was found on alfalfa pulp (24 days), which could help to reduce the risk of contamination during industrial production. Study of the spent substrate as well as the harvested mushrooms revealed that the biological efficiency was related to the higher protein content (17.42%) in the alfalfa pulp compared to wheat straw, as well as greater degradation of cellulose (57.58%) and hemicellulose (56.60%). This was, by and large, due to greater extracellular hydrolytic and oxidative enzyme activity from the mushroom growth in the alfalfa pulp. The quality and safety of the fruiting bodies produced on alfalfa pulp was evaluated, which showed that the protein content was 20.4%, of which 46.3% was essential amino acids, and levels of trace elements and heavy metals were below acceptable limits. Hence, oyster mushroom cultivation using alfalfa pulp provides an alternative method to produce a value-added product, while reducing the biomass wastes in the green protein bio-refinery, and may contribute to sustainable growth in the agricultural industry.