This study explores whether masterbatch systems (MBs) can effectively incorporate high loadings of TMP fibers and clay fillers into polyolefins while maintaining or improving the mechanical, thermal, rheological, and water absorption properties of conventionally compounded composites. MBs containing 60–80 wt% TMP fibers and clay fillers in a high-density polyethylene (HDPE) carrier were produced and subsequently diluted to 30wt% filler. Mechanical, thermal, melt flow index, filler dispersion by SEM images, and water absorption properties of the resulting specimens were assessed and compared to a control (direct mix of components with 30wt% filler). Equivalent formulations using recycled polypropylene (rPP) were also prepared to assess the robustness of the MB strategy across different polyolefin matrices. SEM image analysis revealed a homogeneous dispersion in both the MB and the diluted systems, with distances between clay particles in the diluted samples most commonly ranging from 5 to 10 µm. Tensile strength, Young’s modulus, and elongation remained mostly unaffected or were improved by the dilution step, as confirmed by measurements compared to the control (tensile strength 27.8 ± 0.7 MPa, modulus 2583 ± 102 MPa, and elongation 3.1 ± 0.3%). Thermal properties were also consistent with the control, and diluted samples exhibited reduced variability in melt flow index values. The HDPE-based MB approach also performed consistently in rPP; the HDPE-based MB diluted with rPP exhibited higher water absorption (approx. 64% higher) compared to the rPP-based MB diluted with rPP. This behavior is likely attributed to reduced compatibility between the components (HDPE and rPP). Overall, the results demonstrate that the MB route enables efficient incorporation of TMP fibers and clay into polyolefins without compromising key material properties, offering a practical and scalable alternative to direct compounding