The massive accumulation of petrochemical-derived gypsum (PDG) poses significant environmental management challenges, necessitating innovative valorization strategies within the circular economy. This study investigated the engineering feasibility and ecological safety of repurposing gypsum as a functional aggregate substitute in the production of controlled low-strength materials, aiming to reduce reliance on natural resources while effectively managing industrial waste. The experimental program was conducted in two distinct stages using a binder system of Type I Portland cement and Class F fly ash. Stage I evaluated the potential of maximum waste diversion by completely replacing natural fine aggregates with gypsum (100% replacement). Stage II focused on optimizing the mix for industrial viability by reducing the gypsum content to 50% and 37%, thereby partially reintroducing natural coarse and fine aggregates to improve volumetric stability. The study assessed mechanical properties through compressive strength testing under air-curing and water-curing regimes. It evaluated environmental impact via seawater immersion tests, pH monitoring, and toxicity characteristic leaching procedures. The investigation revealed that the 100% PDG mixture achieved a 28-day compressive strength of 4.69 MPa due to an ettringite-driven air-hardening mechanism but exhibited moisture sensitivity. Conversely, the 37% PDG substitution yielded the highest strength (4.72 MPa) with superior volumetric stability. Leaching assessments confirmed that heavy metal concentrations and pH remained within regulatory limits. Consequently, the 37% replacement ratio provided the optimal balance between mechanical performance and durability, validating the feasibility of materials for sustainable coastal infrastructure and road sub-base applications.