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Wood residue (WR) is one of the most important biorenewable and sustainable resources, however, it is still a big challenge to directly use such hydrophilic resources to obtain thermoplastics by common thermoplasticization methods. Consequently, WR is usually used as fuel to produce heat or as fillers in furniture and decoration materials. Herein, a WR‐based sustainable thermoplastic with both good thermoplasticity and waterproof performance by grafting hydrophobic n‐octanol side chains (IP‐8) onto the WR is reported. Thermoplasticity and waterproof mechanisms of the prepared thermoplastics are extensively evaluated. It is found for the first time that Tg of the modified WR can be significantly reduced to 54 °C, which is much lower than the reported value (≈200 °C) of unmodified WR. Tm peaks are evidently detected once the IP‐8 content exceeds 52.1 wt%, implying much better thermoplasticity in comparison with the unmodified WR. The good thermoplasticity and waterproof performance are mainly attributed to the formation of new crystal lamella with a crystallite size of ≈84 nm and hydrophobic spherical nanoparticles (150–350 nm). The developed method has large potential application in the fields of environmental‐friendly and sustainable macromolecular materials based on biomass resources like wood residue and plant straw.