The objective of this research was to prepare an optimized bio-composite for packaging based on alkali-treated banana pseudo-stem fiber (BPSF), PBAT, and PLA using response surface methodology (RSM). The effects of three factors, i.e., alkali-treated BPSF (0.8 to 2.4 g), PBAT (0.75 to 2.25 g), and PLA (1.6 to 3.2 g) on two dependent variables, i.e., bending strength and tensile strength of bio-composite, were investigated. Box-Behnken design (BBD) provided the combination for an optimum composite, which was 1.15 g of alkali-treated BPSF, 2.09 g of PBAT, and 2.66 g of PLA, respectively. The bending strength and tensile strength for alkali-treated BPSF/PBAT/PLA composite were 32.62 MPa and 30.91 MPa, which was 20.50% and 16.51% higher than native BPSF/PBAT/PLA composite. The bio-composite prepared using the optimized results was further characterized by Fourier transform infrared spectroscopy (FTIR), thermogravimetry, scanning electron microscopy (SEM), mechanical testing, contact angles, and water absorption tests. Analyses showed that alkali-treatment could improve the adhesion and compatibility of BPSF in the polymer matrix. These outcomes were associated with the use of treated-BPSF for better mechanical strength and lower hygroscopicity. This result demonstrated that alkali-treated agricultural residue and degradable polymer could be used to prepare composite materials for green packaging application.