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Scrap metals are a cost-effective secondary resource for producing functional metal oxides/hydroxides. Developing such functional hydroxides from scrap Mg via a low-energy, chemical-free process has high technological importance in the current scenario, as it emphasizes the ‘waste to wealth’ and green motives of production. This study presents an aqueous mechanical milling technique as a facile approach to yield functional grade nano Mg(OH)2 from industrial Mg crumbs. Formation of fiber-like nano Hy-Mg(OH)2 was confirmed on milling of waste metal scraps, by carefully controlling the mechanical parameters viz. the ball to powder mass ratio, milling medium, milling time, and milling speed. The optimized production of Hy-Mg(OH)2 was obtained after 90 h of milling, the evolution was confirmed using standard characterization techniques like XRD, TEM, and EDS. Flame retardant polyester/nano Hy-Mg(OH)2 composites were developed using casting technique. The developed polyester/nano Hy-Mg(OH)2 composites showed good flame retardancy, an oxygen index of ∼ 33% was obtained with 0.3 wf of nano Hy-Mg(OH)2 addition.