Chitosan nanoparticles (CNPs) have gained increasing attention as sustainable, biocompatible, and multifunctional nanomaterials with diverse applications in agriculture, medicine, food technology, and environmental remediation. Chitosan, derived from chitin through deacetylation, possesses inherent antimicrobial and biodegradable properties that are further enhanced at the nanoscale, enabling better solubility, surface activity, and bioavailability. This chapter provides a comprehensive overview of the synthesis of CNPs through methods such as ionic gelation, reverse micelles, emulsification, and spray drying, and shows how the processing parameters influence particle size, stability, and functional performance. The physicochemical properties of CNPs—including particle size distribution, zeta potential, morphology, porosity, and chemical composition—are studied in relation to their mechanisms of action, such as membrane disruption, endocytosis, controlled release, and elicitation of host defense responses. Key applications are being investigated across sectors: as smart agrochemical carriers and elicitors of plant immunity, targeted drug and gene delivery systems, antimicrobial food packaging, wastewater treatment agents, aquaculture enhancers, and cosmetic additives. Despite their potential, challenges remain in terms of large-scale production, raw material variability, regulatory approval, and long-term ecological safety. The chapter concludes with an outlook for the future prospects, focusing on green synthesis, standardized characterization, interdisciplinary optimization, and integration with new technologies. Overall, CNPs represent a promising frontier in sustainable nanotechnology, bridging the gap between natural biopolymers and advanced applications to address pressing global challenges in health, agriculture, and the environment.