The development of jute-reinforced recycled polyethylene (PE) and polypropylene (PP) bio-composites using a heat-pressed molding technique and the feasibility of using them as thermal-insulating panels in building interiors have been studied in the current research. Lignocellulosic natural jute fibers of different volume fractions were employed as reinforcement to fabricate recycled PP and PE composites, and their thermal and mechanical characteristics were investigated for the intended applications. The developed jute-PP composites showed a higher tensile (75.16 MPa) and flexural (121.13 MPa) strength compared to jute-PE with the tensile and flexural strength of 55.62 MPa and 74.53 MPa, respectively, which is attributed to the better tensile strength of PP and its superior interfacial bonding with the jute fiber than PE. The fractographic investigation also confirmed the desired interfacial attachment of reinforcement and recycled polymers in the composite structure. The heat barrier characteristics, including low thermal conductivity (0.2694 W/m.K and 0.1852 W/m.K for jute-PE and jute-PP, respectively) and enhanced conductive and radiative heat resistance with increased volume fraction of jute fiber, specified adequate heat barrier performance of the developed composites for building thermal applications. The thermogravimetric analysis (TGA) and differential scanning calorimetry (DSC) study revealed comparable thermal stability of both composites at elevated temperatures. Additionally, due to reduced interfacial vacuity and the existence of hydrophobic PE and PP, composite samples demonstrated very low water absorption with time, which suggested the potentiality of utilizing them as durable heat-insulating materials in building structures. Accordingly, the fabrication of thermal-insulating engineered recycled biocomposites and their application in designing green buildings can significantly contribute to reducing the global carbon footprint associated with thermal energy consumption of buildings and alleviating the growing environmental problems of plastic waste by utilizing them as matrix polymer in fiber-reinforced composites.