The present paper reports the electronic structure, thermal and electronic transport properties of layered oxychalcogenides LaAgXO (X=Se,Te) using density functional theory. Different scattering mechanisms, such as acoustic deformation scattering (ADP), ionized impurity scattering (IMP), and polar optical scattering (POP) are included to calculate the scattering rates at various doping concentrations and temperatures. The calculated scattering rates are used in the Boltzmann transport equation to get the absolute values of thermoelectric coefficients. The Seebeck coefficient of both the compounds is nearly 400 μV/K for optimal p-type doping. The lattice thermal conductivity of both LaAgXO is ultralow with values around 0.20 W/mK along the "c"axis at 300 K due to low lifetime and low group velocity. This is lower than other well-known thermoelectric materials, such as PbTe and SnSe. Rattling motion observed in the Ag-Te tetrahedral layer might be the reason for the significant suppression of κl. We predict huge ZT values of 1.63 for p-type and 2.8 for n-type LaAgTeO at 900 K, which are higher than that of promising thermoelectric materials, such as BiCuSeO (1.4) and LaCuSeO (2.71). There is a crossing in phonon band dispersion which forms a nodal line on the 001 plane that may lead to topological behavior. This study highlights LaAgXO as potential thermoelectric materials for future device applications. © 2023 American Physical Society.