The rapid industrialization process has increased the amount of CO2 emission and caused large formation of environmental by products (waste) which leads to heavy environmental pollution. Almost 10% of total CO2 emission of the world is caused by cement industry alone. With the advancement of modern civilization the level of consumption of paper has increased which has led to higher generation of disposable paper (waste). Discarded paper is a major source of pollution caused by paper. Paper is principally wood cellulose. Cellulose is a natural polymer containing polar –OH groups which can form hydrogen bonds to gain more stability and strength. This paper reviews on the environment friendly use of this waste paper in construction industry in order to reduce pollution and sustainability. Papercrete is a composite material using discarded paper as a partial replacement of Portland cement resulting in reducing the amount of cement consumption and making an environment friendly building material. This paper aims to review on the fundamental engineering properties like compressive strength, tensile strength, density and shrinkage, stress-strain behavior, water absorption of papercrete. Further it discusses about other advantages and disadvantages of papercrete in construction industry. It also emphasizes on using bricks made with papercrete for building relatively light and ideal material for earthquake prone areas. The paper also proposes the use of papercrete as an alternative to conventionally used construction material for creating low cost sustainable housing in rural and remote areas of Bangladesh. In Bangladesh, majority of low cost rural houses are made of locally available weak materials like bamboo, wood, mud etc. Papercrete is far more superior to strength and durability compare to those materials. And it is also very economic. In Bangladesh, paper is a cheap commodity which leads to high level of consumption and extraction of natural resources resulting in more waste and pollution. By using papercrete the reckless wasting of paper will be reduced and the price of paper will eventually rise. As a consequence of high price, the use of paper will be more productive and eventually will lead to less consumption of wood and other natural resources causing less pollution. It will create new scope and challenges for paper sector in Bangladesh. The paper also focuses on the upcoming challenges for paper industry. Utilizing papercrete in the construction sector can play an influential role in attaining environment friendly sustainable development for Bangladesh.