Fly ash (FA) was chemically modified by activation with sodium hydroxide and used in fabrication of bio-composite films with poly(vinyl alcohol) (PVA) by aqueous casting method. The particle size distribution patterns of modified-fly ash (MFA) were shifted from 2-20 mu m to the higher regions 2-40 mu m in the analysis chart of Malvern Light Scattering Particle Size Analyser (MLSPSA). On the oxides based chemical analysis by X-ray Fluorescence Spectroscopy (XRF), the compositions of major oxides, SiO2 73.5%, Al2O3 19.2% and Na2O 1.4% were significantly changed to SiO2 52.9%, Al2O3 23.6% and Na2O 5.9%, due to the dissolution and re-crystallisation of new phases which are characterised by X-ray diffraction (XRD). The composite film reinforced with 20 wt% MFA showed up to higher tensile strength 289% (three-fold) compared to those of unmodified FA filled films. The alkali treatment (sodium hydroxide) of FA is a very promising approach to improve the mechanical strength, and hence, further enhance the potential for recycling FA as a suitable filler material in bio-composite materials.