Energy efficiency and waste management are crucial for sustainability of construction sector. In this research, a new gypsum composite material is presented in which traditional raw materials have been partially replaced by thermal insulation waste from facades energy retrofitting projects, using an innovative process to recover this waste. Consequently, a novel lightweight gypsum composite has been developed with a replacement of up to 14.7 % by weight of the original material with EPS waste, adding mineral wool as reinforcement fibres (0.375 %wt.). Thus, thermal behaviour analysis of these new composites has been conducted, both material itself and of its performance as part of a real construction system, including finite element analysis of the construction system. In addition, the physicochemical, physical and mechanical characterisation of the new composites has been carried out. Results show that the developed new material has a density 20.3 % lower than the traditional gypsum composite, resulting in a 30.4 % reduction in thermal conductivity. Furthermore, the use of these new lightened gypsum composites as finishing boards in lightweight steel frame (LSF) wall systems reduces the overall thermal resistance of the wall by up to 10.6 % with just 25 mm thickness. On the other hand, the mechanical resistance of this new material exceeds the reference values established by current standards, ranging between 4.18 and 1.87 MPa for flexural strength and between 7.87 and 4.27 MPa for compressive stresses. Additionally, the developed composites have shown a reduction in both total and capillary water absorption compared to traditional gypsum by 19.6 % and 40.0 % respectively, enhancing the material’s durability and its excellent thermal properties throughout its lifespan.