<p>The rapid development of the global food industry has heightened the reliance on petroleum-derived packaging materials which lead to significant environmental damage, increased plastic waste accumulation and resource depletion. Agro-industrial by-products particularly fruit and vegetable peels have become abundant and low-cost resources that are often discarded as waste despite being rich in bioactive compounds such as flavonoids, phenolics and essential oils. These residues are enriched with bioactive compounds that derive from the agro-industrial byproducts. This review examines conventional solvent-based extraction procedures and emerging green extraction technologies, including ultrasound-assisted extraction, microwave-assisted extraction and enzyme-assisted extraction for the recovery of bioactive compounds from agro-residues intended for sustainable food packaging applications. Additionally, the functional roles of these bioactives in active and intelligent packaging systems are examined which encompass their ability to suppress the microbial proliferation, improve barrier characteristics, facilitate the real-time freshness assessment and delay lipid oxidation. Consequently, artificial intelligence (AI) offers innovative sensor-equipped packaging capable of precise data analysis. Transforming agricultural waste into high-value packaging materials enables agro-residue bioactives to support circular economy principles, reduce dependence on petroleum-based plastics and promote the development of sustainable and low-waste food packaging systems. Thus, the incorporation of agro-residue bioactives into packaging technology signifies a promising approach for enhancing the environmentally sustainable food preservation while ensuring the product quality and safety, in line with Sustainable Development Goal (SDG) Goal 12: Responsible Consumption and Production and Goal 13: Climate Action.</p>