Natural fibres are in great demand as a clean and green material as reinforcement in sustainable and environment-friendly biodegradable composites. The study aimed to extract palm grass leaf fibres through water retting, a cleaner and greener approach compared with the use of 5–10% NaOH. The physicochemical characterisation was done by SEM, optical microscopy, FT-IR, XRD, TGA, bundle strength, moisture content and standard biochemical tests for cellulose, hemicellulose, lignin and ash. New natural fibres extracted from Curculigo capitulata by water retting showed a smooth surface of uniaxial fibres under SEM and optical microscope compared to eroded surfaces of chemically extracted fibres. Both the fibres extracted by water retting and with 5% NaOH showed nearly similar crystallinity index (84–85%) and size (2.44nm), whereas the former contained 64% cellulose with bundle strength 154MPa compared to 72% and 219.11MPa with the latter. While using 10% (NaOH) showed cellulose 82.29 ± 0.63%, crystallinity index 87.43%, and bundle strength 256.46 ± 15.81MPa. Approximately similar lignin content (20.30 ± 0.91–21.66 ± 1.18%) and mass degradation (%) were obtained in water-retted and 5%–7.5% NaOH extracted fibres. FT-IR spectra showed the characteristic bands at 3421cm⁻¹ for O–H stretching and 2917cm⁻¹ for alkyl C–H stretching in cellulose; at 1630cm¹ for Cdouble bondC stretching in lignin. All the extracted fibres showed industrial potential similar to successful natural fibres for fine rope, yarn, handmade paper, and fabrics aiming for a circular bioeconomy.