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Thermal performance of building envelope has been of great importance in determining the indoor thermal environment mainly due to the impact of existing global warming issues. Thus there is a need to provide wall system with better thermal performance than conventional wall systems. The focus of the research is to tackle the twin issues of sustainability and thermal performance of building wall systems for low-cost housing. Fiber reinforced mortar (FRM), and thermally enhanced sustainable hybrid (TESH) bricks were developed by optimizing the mix design using Glass Powder, Palm Oil Fly Ash, and Oil Palm Fibers. Both the FRM and TESH bricks, which constitute the TESH wall system, were analyzed for physical, mechanical and thermal performance and they comply with the various codes of practice for building materials. Heat transfer simulation was performed to determine the thermal performance of the newly developed TESH. The temperature distribution and rate of heat transfer through the wall system was found to be significantly lower than conventional wall systems. Also, the energy consumption analysis suggested 10.6% energy reduction for TESH wall system over conventional wall system. The total energy costing for the building was also reduced by 10.2% for TESH wall system.