Continuous anthropogenic inputs have raised environmental concerns regarding non-degradable plastics derived from non-renewable petrochemicals, creating an urgent need for sustainable alternatives and driving a paradigm shift toward bioplastics. This review investigates the transformative role of the natural biopolymer xanthan gum as an eco-friendly additive in advancing biodegradable materials. Derived from Xanthomonas campestris, xanthan gum offers non-toxicity, biodegradability, and strong compatibility. The literature indicates that its negative charge enables interactions with positively charged molecules, enhancing composite properties such as mechanical strength. Although xanthan gum has limitations when used alone, it functions as an effective additive in packaging applications. The novelty of this work lies in exploring diverse techniques and formulations for integrating xanthan gum into bioplastic films and coatings, emphasizing its role in reinforcing biopolymer structures. As a sustainable alternative, xanthan gum-based composites preserve food quality and extend shelf life by providing protection against moisture, oxygen, UV radiation, and microbial contamination. Realizing its full potential requires optimized formulations to prevent structural disruptions and reduced stretchability at higher xanthan gum concentrations. Continued research, especially leveraging nanotechnology, is essential to amplify its advantages and address related challenges. This review highlights xanthan gum’s pivotal contribution to bioplastic innovation, presenting a strong case for its broader adoption in the food packaging industry.