Current environmental concerns fostered a strong interest in extracting polymers from renewable feedstocks. Chitosan, a second most abundant polysaccharide after cellulose, may prove to be a promising green material owing to its renewability, inherent biodegradablity, natural availability, non-toxicity, and ease of modification. This review is intended to comprehensively overview the recent developments on the isolation of chitosan from chitin, its modification and applications as a reinforcing candidate for food packaging materials, emphasizing the scientific underpinnings arising from its physicochemical properties, antimicrobial, antioxidant, and antifungal activities. We review various chitosan-reinforced composites reported in the literature and comprehensively present intriguing mechanical and other functional properties. We highlight the contribution of these mechanically robust and responsive materials to extend the shelf-life and maintain the qualities of a wide range of food commodities. Finally, we assess critical challenges and highlight future opportunities towards understanding the versatile applications of chitosan nanocomposites.