The commercial success of hydrothermal carbonization (HTC) is contingent on seeking solutions for the downstream wastewater (process water) generated during the process which is still regarded largely as a nuisance. In the present study, the reusability and valorization strategy of process wastewater generated during co-HTC of organic fraction of municipal solid waste (food and yard waste) at 220 °C for 1 h was established. The process wastewater was anaerobically digested in the first part to determine its methane-generating capacity; and in the second part, it was recirculated up to five times to understand the evolution of physicochemical and fuel characteristics of hydrochar. The process water was characterized by the presence of high total organic carbon (up to 40 g/L) and chemical oxygen demand (up to 96 g/L). The decreasing trend of heavy metals with increasing recirculation suggested possible adsorption/immobilization mechanism taking place to the hydrochar surface. The process water generated from co-HTC condition has anaerobic biodegradability of 72% while experimental and theoretical methane yield observed were 224 mL/g COD and 308 mL/g COD, respectively. The presence of high organic and ionic species in recirculated process water promoted the overall carbonization process which was evident from the increased energy yield (86 to 92%), carbon content (68 to 71%) and calorific value (20 to 27 MJ/kg). The recirculation also enhanced overall combustion characteristics of hydrochar as analyzed by thermogravimetric analysis. The recirculation strategy enhanced fuel properties of hydrochar while making sure upstream and downstream water related burden is reduced (as illustrated by life cycle analysis) to create a cleaner production system for renewable solid biofuels production.