Industrial sea food residues, mainly crab and shrimp shells, are considered to be the most promising and abundant source of chitin. In-depth understanding of the biological properties of chitin and scientific advancements in the field of nanotechnology have enabled the development of high-performance chitin nanomaterials. Nanoscale chitin is of great economic value as an efficient functional and reinforcement material for a wide range of applications ranging from water purification to tissue engineering. The use of polymers and nanochitin to produce (bio) nanocomposites offers a good opportunity to prepare bioplastic materials with enhanced functional and structural properties. Most processes for nanochitin isolation rely on the use of chemical, physical or mechanical methods. Chitin-based nanocomposites are fabricated by various methods, involving electrospinning, freeze drying, etc. This review discusses the progress and new developments in the isolation and physico-chemical characterization of chitin; it also highlights the processing of nanochitin in various composite and functional materials.