In recent times, there has been a notable surge in the interest in promoting environmentally conscious products, particularly within the building industry where the focus has shifted towards sustainable materials. In this study, as a sustainable building material, ceiling tiles have been fabricated as a composite board containing waste materials, namely waste paper, sawdust, recycled polyethylene terephthalate (PET), and epoxy resin, and characterized comprehensively through physical and mechanical tests, density, thickness swelling (TS), modulus of elasticity (MOE), modulus of rupture (MOR), and flexural strength (FS) for product stability. A total of nine composites were fabricated with different ratios through molding techniques, and the characterization results were compared to determine the optimized stable ratio of composite composition. The composition of 25% waste paper, 15% sawdust, 10% recycled PET, and 50% epoxy resin presented the maximum FS compared to the other composite ratios. Water absorption (WA) and thickness swelling were evaluated after immersion durations of 1–24 h. The findings revealed that as the density increased, the sawdust content within the matrix decreased from 25–35%. Concurrently, an increase in recycled PET content resulted in decreased water absorption and thickness swelling. Significantly, the MOE, MOR, and FS demonstrated optimal values at 864.256 N/mm2, 12.786 N/mm2, and 4.64 MPa, respectively. These observations represent the excellent qualities of this hybrid composite board, particularly in terms of sustainability, stability, and water absorption capacity. Moreover, its lightweight nature and ability to support ceiling loads further enhance its appeal for construction applications. This study not only advances the discourse on sustainable construction materials but also fosters opportunities for broader acceptance and innovation within the industry.