Formaldehyde (FA) emission, dimensional stability, and mechanical properties of urea-formaldehyde (UF) resin-bonded light medium density fiberboards (MDFs) made of mixtures of hardwood fiber (Fagus orientalis Lipsky) and chestnut (Castanea sativa Mill.) shell flour have been evaluated. Six panel types were made of mixtures of the wood fiber and chestnut shell with ratios of 10/0, 9/1, 8/2, 7/3, 6/4, and 5/5 (by weight). FA emissions from the panels were significantly decreased with increasing content of the chestnut shell flour (CSF). However, the dimensional stability, the flexural properties, and the internal bond strength were negatively affected by increasing content of the shell flour. The FA reduction can be mainly attributed to a high amount of the phenolic extractives in the chestnut shell. Chestnut shell has a high potential as an effective FA scavenger in the manufacture of UF resin-bonded wood-based panels if optimized properly.