This study showed sustainable solutions for the growing demand for biodegradable composites in the construction industry through the acquisition and recycling of wood residues and lignocellulosic materials. The researchers focused on producing an alternative palm oil-based polyurethane adhesive, designated as Modified Reused Palm Oil-Polyurethane adhesive (MRPO-PU), for binding sugarcane bagasse particle boards. This approach leverages agricultural waste, contributing to a circular economy. The MRPO-PU adhesive was created by cleaning used palm oil through filtration and heating, followed by epoxidation and hydroxylation reactions. Characterization using Fourier Transform Infrared Spectroscopy (FTIR) confirmed the bio-polyol's readiness for the next stage, where it was mixed with Polymeric Diphenylmethane Diisocyanate (pMDI) to form the polyurethane adhesive. Particleboards with varying adhesive ratios (15 to 85 wt%) were produced and subjected to physical and mechanical testing. Physical testing involved immersing the boards in water for 24 hours, measuring thickness swelling (TS) and water absorption (WA). Mechanical properties were determined using a Universal Testing Machine (UTM) in the Civil Engineering Laboratory at Adamson University. The results demonstrated a positive correlation between adhesive content and the mechanical properties of the particleboards, indicating that increased adhesive content enhances their mechanical strength and dimensional stability. This research provides valuable insights for developing sustainable, high-performance particleboards using repurposed waste materials.