Natural fiber-reinforced polystyrene composites (NFRPCs) present a sustainable alternative to conventional composites, offering a balance between environmental benefits and mechanical performance. Their application in sectors such as automotive and construction is gaining attention due to their lightweight nature, cost-effectiveness, and reduced carbon footprint. However, challenges such as weak fiber-matrix adhesion and the thermal sensitivity of natural fibers necessitate surface treatments and compatibilizers to improve composite performance. This review examines the influence of fiber treatments, including alkali, silane, benzoylation, and maleic anhydride, on interfacial bonding and mechanical integrity. Comparative analyses of untreated and treated fiber composites demonstrate significant enhancements in tensile and flexural properties, confirming the effectiveness of chemical modifications. A case study on automotive interiors integrates mechanical property evaluation by the Mori-Tanaka method, thermal performance assessment using the finite element method, and life cycle analysis, providing a comprehensive evaluation of NFRPCs’ industrial applicability. Results indicate that optimized NFRPCs offer viable solutions for lightweight, durable, and eco-friendly materials, supporting circular economy initiatives. The findings reinforce their potential for replacing synthetic composites in targeted applications while addressing economic and environmental considerations.