Chemical modification of cellulose offers routes for structurally and functionally diverse biopolymer derivatives for numerous industrial applications. Among cellulose derivatives, cellulose ethers have found extensive use, such as emulsifiers, in food industries and biotechnology. Methylcellulose, one of the simplest cellulose derivatives, has been utilized for biomedical, construction materials and cell culture applications. Its improved water solubility, thermoresponsive gelation, and the ability to act as a matrix for various dopants also offer routes for cellulose-based functional materials. There has been a renewed interest in understanding the structural, mechanical, and optical properties of methylcellulose and its composites. This review focuses on the recent development in optically and mechanically tunable hydrogels derived from methylcellulose and methylcellulose-cellulose nanocrystal composites. We further discuss the application of the gels for preparing highly ductile and strong fibers. Finally, the emerging application of methylcellulose-based fibers as optical fibers and their application potentials are discussed.