A method for producing fire-resistant cellulose insulation materials using liquid fire retardants. Cellulose materials (e.g. paper) are initially shredded into multiple pieces which are sprayed with a mist containing liquid fire retardants. The sprayed paper is then subjected to a delay period before further processing to ensure diffusion of the fire retardants into the paper. The paper is then passed into a drying chamber in combination with a stream of heated air. The air is preferably introduced into the chamber in a non-parallel, angular flow path relative to the longitudinal axis of the chamber. To completely dry the paper, movement of the paper and heated air through the chamber is periodically interrupted so that the paper is completely dried by the air. Interruption may be achieved by providing moving baffle members within the chamber. As a result, a dried cellulose insulation product is manufactured.