This research investigates the co-liquefaction of Arundo donax and PET plastic to assess their potential as feedstocks for producing bio-oil suitable for bio-pavement applications. The study demonstrates the feasibility of using an invasive species like Arundo donax combined with plastic waste for hydrothermal liquefaction (HTL) to generate bio-oil. The experimental design varied three critical parameters— temperature, residence time, and biomass-to-plastic ratio—to optimize oil yield and gross calorific value (GCV). By employing Response Surface Methodology (RSM) and a Rotatable Central Composite Design (RCCD), the study achieved robust statistical modeling, enabling the identification of optimal conditions across 15 experimental runs and two blank experiments. The results indicated that the char produced from both biomass and PET dominated the product distribution, albeit due to different decomposition mechanisms. PET decomposition primarily yielded solid terephthalic acid (TPA), while biomass char resulted from incomplete lignin and cellulose breakdown. The highest oil yield was obtained under severe conditions, highlighting the significant impact of process parameters on product distribution. Analytical techniques such as FTIR and GC-MS revealed the presence of diverse functional groups and confirmed the decomposition of PET into its monomers. XRD and XRF analyses further characterized the char, identifying key structural components and elemental composition. Statistical analysis showed a significant quadratic relationship between oil yield and GCV, with minimal prediction error, indicating the model’s reliability. The optimized bio-oil exhibited a higher benzene content, suggesting enhanced decarboxylation of PET, which was supported by FTIR data. Rheological testing demonstrated the potential of the bio-oil as a rejuvenator for bio-pavements, with bio-char showing promising properties as a filler. Rheological testing using Dynamic Shear Rheometry (DSR) was conducted to evaluate the bio-oil’s potential as a rejuvenator in bio-pavements. The DSR tests revealed that the bio-rejuvenators effectively reduced the stiffness of aged materials, restoring some of the original flexibility and viscous properties lost due to aging. While the oil derived from pure biomass performed slightly better in this regard, the co-liquefied oil still showed promise, particularly in applications requiring a balance between flexibility and stiffness. Additionally, when bio-char was used as a filler in mastic formulations, it exhibited superior stiffness and rutting resistance compared to conventional fillers, although it was less effective in resisting fatigue cracking. Despite the bio-oil’s lower GCV compared to traditional fuels, the process offers a promising pathway toward sustainable energy production. Continued optimization, particularly of the biomass-to-PET ratio and process conditions, could further enhance the fuel properties of the bio-oil, making it a viable alternative for energy and material applications.