The escalating demand for packaging materials, driven by the changes in consumptions patterns and e-commerce, has placed immense pressure on the environment. Traditionally dominated by plastic materials, the packaging industry is struggling with the material's detrimental environmental impacts, including resource depletion and persistent waste. This research explores the potential of mycelium-based bio-foam (MBF) as a promising eco-friendly substitute of foam packaging such as expanded polystyrene (EPS). A comprehensive market analysis revealed a growing public consciousness regarding plastic pollution and a corresponding desire for sustainable packaging solutions. While the potential of MBF was recognized, concerns about weight, cost, and environmental performance emerged as key barriers to widespread adoption. To address these challenges, this study focused on optimizing MBF design and assessing its overall environmental profile. Through finite element analysis (FEA) simulations of drop tests on a 32-inch flat-screen TV and a porcelain vase, the study evaluated the impact of MBF properties and design configurations on shock absorption performance. Results demonstrated MBF's ability to protect both products from damage under various impact scenarios. Optimization of MBF design parameters, such as thickness and configuration, proved crucial in achieving optimal protection while minimizing material usage. To comprehensively assess the environmental implications, a life cycle assessment (LCA) was conducted comparing MBF to EPS foam packaging. While MBF exhibited higher transportation emissions due to its greater weight, the overall environmental impact was notably lower across the product lifecycle compared EPS. Factors such as biodegradability and reduced energy consumption during production contributed to MBF's superior environmental performance. This research highlights the potential of MBF as an alternative to traditional polystyrene packaging. However, to fully realize its commercial viability, continued research and development are essential to address challenges related to weight optimization, cost reduction, and large-scale production. By investing in these areas, the packaging industry can accelerate the transition towards a more sustainable future.