The present study describes the use of Cinnamomum camphora waste/fallen leaves as an eco-friendly natural colorant for developing colorful and antibacterial wool fibers in view of growing environmental pollution and increasing needs for biomedical textiles in healthcare sector. Extraction of the natural colorant from C. camphora reddish colored/middle-aged waste/fallen leaves was carried out via simple water bath and ultrasound water bath extraction methods. While optimizing the colorant extraction in an aqueous solvent, ultrasound water bath provided enhanced extraction efficiency at pH 3, temperature of 70 °C, an initial dose level of 1.0 gm/50 ml of H2O, time of 80 min, and ultrasonic frequency of 80 kHz. Phytochemical analysis of extracted dye was successfully carried out using simple qualitative experimental analysis. The extracted colorants from C. camphora waste leaves were used to dye merino wool fibers through exhaustion dyeing technique. The optimal dyeing conditions, dye performances, and the ultrasonic effects were reported effectively. Build-up properties and fastness characteristics were studied in the presence and absence of mordants under corresponding ISO standards. Increasing ethanol concentration, increased discoloration properties of dyed wool fiber. Dyeing kinetics and dyeing rates under both simple water bath and ultrasound water bath conditions were compared. The structural and thermal changes in the dyed fibers under both conditions were analyzed using FT-IR, TG, and SEM analysis. An adequate amount of C. camphora leaves extract on wool fiber exhibited good antibacterial behaviors with high durability to increasing number of washing cycles. Premordanting with Cu2+, Fe2+, and Al3+ salts had a slightly negative effect on the antibacterial activity of dyed wool fibers but showed enhanced durability. Camphor waste leaves will prove great potential for industrial application as a source of natural colorant, as well as a value-adding application (biomedical textile) in addition to its normal usage.