The construction industry recognizes the need for green, lightweight, and self-compacting materials that are also ecologically benign. Recent studies suggest that the novel lightweight foamed concrete (LFC) could potentially reduce the self-weight of structures. Adding natural fibers to FC improves its mechanical properties and contributes significantly to sustainability. One of the greatest difficulties in constructing reinforced LFC is the reinforcing steel bars’ corrosion, which impacts the behavior and lifetime structural integrity of concrete buildings. Therefore, this research aims to investigate the potential use of sugarcane bagasse fiber (SBF) in low-density LFC, after altering it with sodium hydroxide-based alkali treatment (NaOH) to enhance its properties. Low-density FCs are prone to serious durability and performance degradation; hence, in this experiment, FCs with a low density of 800 kg/m3 were fabricated and evaluated. Quantification and evaluation were conducted on several different characteristics, including the slump, density, thermal conductivity, and compressive, flexural, and splitting tensile strengths. The findings suggest that employing SBF with an optimal reinforcing range of 3% to 4% can improve the mechanical characteristics and thermal conductivity of LFC-SBF composites. The slump flow gradually decreased from 1% to 5% of the SBF’s weight fraction. The lowest slump flow was achieved by adding SBF to the LFC mixture at a weight fraction of 5%. The addition of SBF to LFC resulted in a significant boost in the material’s splitting tensile, compressive, and flexural strengths. By adding 4% SBF to LFC, the optimal strength properties were concluded in the material. In addition to this, the weight percent of SBF contributed to an increase in the thermal conductivity of LFC. This was because the porous structure of LFC, which contained SBF, enabled it to absorb heat.