Textile (cotton) dust, which is harmful to humans and the environment, is one of the largest wastes in the textile industry. The aim of this study was to investigate the potential use of this waste in high value-added materials. Physical and mechanical properties and formaldehyde emissions of the three-layered particleboards with textile (cotton) dust in the middle layer were investigated in this study. A phenol formaldehyde resin was used as the binder in particleboard production. Four different amounts of textile dust (10%, 20%, 30%, and 40%) based on the oven-dried weight of the wood were obtained from a commercial textile manufacturer as industrial waste. The density, thickness swelling, modulus of rupture, modulus of elasticity, internal bond, and formaldehyde emissions of the produced panels were determined. The physical and mechanical properties and formaldehyde emissions of the particleboards were negatively affected, which decreased with the addition of a high amount of textile powder. At low rates, the use of textile dust in the middle layer did not significantly decrease the particleboard properties. Textile dust can be a partial solution for the raw material demand of the wood-based panel industry.