Plastic waste management has become a major problem in the present times, and many countries are struggling to deal with it. The situation has become a crisis in developing nations due to a lack of proper waste management, resources, technology, and political will. The extensive usage of foam-based packaging materials such as Styrofoam as a secondary packaging material has led to environmental pollution both in land and water, in developing countries. It is important to address this problem using a sustainable approach such as biomimetic manufacturing. One such solution that is present in developed nations is mycelium-based packaging, wherein the agricultural and industrial-based cellulose waste is converted into a biocomposite with the help of a fungi root network. Such a process has the potential to convert biomass into useful products but also has an indirect effect on pollution reduction by eliminating stubble burning in nations like India. In this review, we examine the details of the manufacturing process, properties, advantages, and limitations of such composite materials. A comparison of the present status of such materials produced in the market by some of the companies across the world is presented. Finally, the challenges involved with such materials and the future directions are discussed.