Paper sludge consists mainly of wet short cellulose fibers that are lost during papermaking and of residual chemicals used in the manufacturing process that remain dissolved in the water. Each ton of paper generates about 40–50 kg of dry sludge, of which 70% is primary sludge. Paper production, which exceeded 400 million tons globally in 2020, generates vast volumes of solid waste. Primary sludge is usually fiber-rich and hence suitable to be recycled back into the papermaking process. However, if the sludge is to be disposed of in landfills, sustainable practices must be developed in order to recover the fibers as they are valuable source for manufacturing high value-added products. This study investigates the valorization of paper sludge discarded by a filter paper manufacturer, with the purpose of producing cellulose acetate films for food packaging. The process involves recovering cellulose fibers from the sludge, purifying them and through acetylation reaction produce cellulose acetate films. FTIR spectra confirmed successful acetylation of fibers and also that acetyl groups reduced the hydrophilicity of cellulose—the contact angle was increased to over 80° from 50° in native cellulose. The films exhibited very good water barrier properties at both 50% and 90% relative humidity (RH)