Novel hybrid panel composites based on wood, fungal mycelium, and cellulose nanofibrils (CNF) were developed and investigated in the present study. In one set of experiments, mycelium was grown on softwood particles to produce mycelium-modified wood which was then hybridized with various levels of CNF as binder. The other set of experiments were conducted on unmodified wood particles mixed with CNF and pure mycelium tissue. It was found that the composites made of mycelium-modified wood and CNF resulted in enhanced physical and mechanical properties compared to the ones made by physically mixing wood, mycelium, and CNF. Scanning electron microscopy (SEM) images showed that mycelium modification covered wood particles with a network of fungal hyphae whereas CNF formed a uniform mycelial film over wood particles. Mycelium modification had a significant effect on reducing water absorption and thickness swelling of the hybrid composites and CNF increased the modulus of rupture and modulus of elasticity, optimally at 2.5% addition. We also present results and analysis pertaining to the development of unique lightweight composite systems with physical and mechanical properties optimized at 5% CNF addition with potential to be used in packaging and furniture applications.