Polyester is the most widely used synthetic fiber globally. However, recycled products from waste polyester textiles (WPET) often suffer from poor performance and low value. This paper introduces solid-state shear milling technology (S3M) to transform WPET into ultrafine fiber powder with a high aspect ratio, followed by solid-state drawing processing producing to produce high performance HDPE/WPET composites. Compared with the pure high density, the flexural strength of WPET with 15% content increased to 24.94 MPa, while the tensile modulus and flexural modulus increased to 507 and 798 MPa, respectively, and the prestretched sheet with good performance was prepared. At a solid-state drawing ratio of 6, the composite exhibited an impressive tensile strength of 116.8 MPa, representing a 600% increase compared to unstretched samples. Additionally, the in-plane thermal conductivity reached 2.89 W/mK, which was 438% higher than unstretched samples. SAXS and 2D-WAXD analyses demonstrated that high solid-state drawing enhanced the orientation of WPET fibers and HDPE, forming an oriented structure. This led to composite crystallinity and orientation levels of 63.7% and 93%, respectively. This study has represented a novel approach to producing high-performance functional products from dye-containing polyester fabrics without requiring separation or physical recovery processes.