Synthetic fibres have been used for the production of high strength composite material of low density for various aerospace and automotive applications. The problem with synthetic fibres includes high energy consumption during processing, high cost, non-biodegradability and environmental pollution during production and disposal. Natural fibre reinforced composites have been explored as potential replacement for synthetic fibres. The research explores the use of Wood fibre reinforcement such as Sterculia Setigera Delile fibre sourced from a durable inner tree bark and Pterocarpus Erinaceus wood dust from high quality wood for the production of a hybrid composite material with epoxy as the matrix. The aim is to produce a Novel Hybrid material with high tensile, flexural and compressive strength, low density and high thermal stability. Taguchi method was used for the design of experiment and the optimization of factors affecting the tensile, flexural and compression strength of the composite. The factors include alkaline treatment (Hot, Cold and Untreated), SSD fibre content (2.5, 5, 7.5, 10, 12.5) wt.%, Pterocarpus Erinacues wood dust content (0, 2.5, 5, 7.5, 10)wt.% and fibre angular orientation (0, 15, 30, 45, 90o). The result showed that the optimum composite parameters consist of 5% Cold Alkaline treated 5% SSD fibre with 7.5% PTE wood dust at 0-degree orientation. The thermal stability of the composite was also improved by the addition of the reinforcements. Factors such as fibre angular orientation and alkaline treatment were significant factors. The optimized composite improved the tensile strength of the composite when compared to the Epoxy Matrix by 105.9% and also improved the flexural strength by 94.91%. The optimized composite has a lower density (1.093g/cm3) when compared to carbon-epoxy composite (1.6g/cm3) and S-glass fibre epoxy composite (1.9g/cm3). The optimized composite would have better Biodegradability, lighter weight means lower energy consumption and cost when used in aerospace and automobile components.