Chitosan, a naturally occurring biopolymer derived from chitin, has emerged as a highly promising instrument for the production and application of metal nanoparticles. The present review delves into the several functions of chitosan in the development and operation of metal nanoparticles, emphasizing its aptitudes as a green reducing agent, shape-directing agent, size-controlling agent, and stabilizer. Chitosan’s special qualities make it easier to manufacture metal nanoparticles and nanocomposites with desired characteristics. Furthermore, there is a lot of promise for chitosan-based nanocomposites in a number of fields, such as metal removal, water purification, and photoacoustic, photothermal, antibacterial, and photodynamic therapies. This thorough analysis highlights the potential application of chitosan in the advancement of nanotechnology and the development of medicinal and environmental solutions.