A process for preparing thermally insulating carbon composite panels (CCP) from used cotton cloth is reported. The pliable cotton cloth is transformed into rigid carbon grid sheets by carbonization after impregnation with a sucrose solution. The layered carbon composite panels are obtained by hand layup of phenol-formaldehyde (PF) polymer solution-impregnated carbon grid sheet followed by curing and carbonization. The carbon composite panels exhibit grid-like pores in the X-Y plane and lamellar-type pores in the lateral plane. Due to their layered structure, the carbon composite panels exhibit pseudo-plastic failure under flexural mode. The density, compressive strength, and flexural strength are modulated in the ranges of 0.45 ± 0.0004 to 0.57 ± 0.0068 g cm−3, 0.86 ± 0.04 to 2.03 ± 0.10 MPa, and 2.6 ± 0.11 to 4.5 ± 0.16 MPa, respectively, by varying the PF solution concentrations from 60 to 100 vol%. The carbon composite panels exhibit oxidation resistance up to 470 °C, excellent fire resistance, and low thermal conductivity in the 0.187 ± 0.0004 to 0.273 ± 0.0014 W m−1. K−1 range. The high EMI shielding effectiveness in the range of 40–67 dB exhibited by the carbon composite panels of 5 mm thickness is due to the conductive and dielectric losses and multiple internal reflections within the grid-like and lamellar-type pores.