To turn food waste streams into valuable items, hydrophobic cellulose nanomaterial has been obtained from ground citrus waste by a one-step process performed in an aqueous solution at room temperature using mild concentrations of hypochlorite and periodate as primary oxidants and TEMPO as a reaction catalyst. Morphological characterization shows a cross-section and length of the nanofibers of the order of 3–5 nm and 1–2 µm, respectively, and some disordered regions with a propensity to chain entanglement. Chemical characterization confirms that the oxidized material has a cellulosic nature and that the native cellulose has been functionalized with the introduction of carboxylic groups. The mild reaction conditions preserve an organic fraction that is not mobilized during extensive aqueous washings and is composed mainly of saturated fatty acids. This fatty fraction is responsible for a slight hydrophobicity of nanocellulose which thus combines the propensity for network formation with water repellency and is suitable for the production of composites. As a representative case study, all-natural plastic films made of two polysaccharides, i.e. nanocellulose and starch, have been produced and characterized, proving that the citrus waste-recovered nanocellulose substantially improves the mechanical and water barrier properties of starch.