Apparatus for making fiber insulation from paper comprises a preshredder having a semi-cylindrical perforate basket with a passageway behind it. An air inlet extends behind the basket into the passageway and an air outlet is located at the front of the passageway. A flail rotatably mounted coaxial in the basket is driven by a motor for shredding paper deposited from a conveyor into the basket. A blower, connected to the preshredder, passes the paper segments to a surge bin where the air and paper segments are separated. The separated paper segments accumulate in the surge bin and are withdrawn from it at a constant predetermined rate by a conveyor and deposited into a duct which interconnects the surge bin and a finishing mill. The air then enters this duct to continue transporting the paper. A dry chemical dispensing device disperses flame retardant material into the duct. The finishing mill includes a large centrifugal fan rotatably mounted in a cylindrical cavity and driven by a motor. The cavity is covered by a perforate plate so that paper segments drawn centrally into the fan are ejected radially from its blades and exploded through the cover to form fiber insulation. The insulation is deposited into another surge bin for separation from the air and accumulation for bagging. The air passes through an air cleaner and is exhausted from the device. Accordingly, the air remains within the apparatus through the entire procedure thereby reducing dust and noise heretofore associated with such apparatus.