Responsible stewardship of temperate forests can address key challenges posed by climate change through sequestering carbon, producing low-carbon products, and mitigating climate risks. Forest thinning and fuel reduction can mitigate climate-related risks like catastrophic wildfire. These treatments are often cost prohibitive, though, in part because of low demand for low-value wood “residues.” Where treatment occurs, this low-value wood is often burned or left to decay, releasing carbon. In this study, we demonstrate that innovative use of low-value wood, with improved potential revenues and carbon benefits, can support economical, carbon-beneficial forest management outcomes in California. With increased demand for wood residues, forest health–oriented thinning could produce up to 7.3 million (M) oven-dry tonnes of forest residues per year, an eightfold increase over current levels. Increased management and wood use could yield net climate benefits between 6.4 and 16.9 million tonnes of carbon dioxide equivalent (M tCO2e) per year when considering impacts from management, wildfire, carbon storage in products, and displacement of fossil carbon-intensive alternatives over a 40-y period. We find that products with durable carbon storage confer the greatest benefits, as well as products that reduce emissions in hard-to-decarbonize sectors like industrial heat. Concurrently, treatment could reduce wildfire hazard on 4.9 M ha (12.1 M ac), a quarter of which could experience stand-replacing effects without treatment. Our results suggest that innovative wood use can support widespread fire hazard mitigation and reduce net CO2 emissions in California.