Owing to the increase in human population, there is a serious need of utilizing bio-based materials. As chitosan-based nanoparticles (NPs) and their derivatives are bio-based, biocompatible and biodegradable materials. CSNPs have property profiles that can be exploited effectively in numerous areas. The presence of –NH2 and –OH groups on its backbone allows CS to be functionalized; in this connection, the chapter describes the physical and chemical modifications of CSNPs. The physical modification can be obtained by blending, whereas for chemical modification, the need of functionalization has been reported with various organic, inorganic, and polymeric compounds. The CSNPs’ modification has been done in order to enhance its properties. Modified CSNPs have been utilized in various applications such as wastewater treatment where it has been applied to enhance the removal of heavy metals and hazardous dyes. In biomedical field, it has potential array of commercial applications for biosensing particularly for speedy wound recovery. Cancer treatment is by far one of the most significant applications of gene therapy and many medical trials utilizing gene therapy are under-study; in agricultural field, these derived compounds have been used to improve the quality of fertilizers and also to prevent the attack of harmful insects for the crops, cosmetic industries and in numerous other applications. For these applications, the modifications with polymers have also proved very useful. Surface amendment is an imperative tool for increasing the hydrophobicity of CSNPs and promoting uniform distribution within the polymer matrix. Modification with other organic compounds such as aldehydes, acids, and sulfates has also contributed significantly to probe new areas of applications.