The development of bio-based flame retardants has received increasing attention. In this study, fully bio-based chitosan/sodium alginate (CS/SA) coating was applied by layer-by-layer (LbL) assembly on Xuan paper to improve its flame retardancy. The LOI value of Xuan paper reached 33.3% after 20 BLs CS/SA coating. Its char length was reduced to 8.8 cm with no after-flame and after-glow. These results showed that the flame retardancy of Xuan paper was greatly improved by LbL assembly CS/SA coating. Thermogravimetry results revealed that CS/SA coating on Xuan paper slowed down the thermal degradation process and promoted the char formation both under nitrogen and air atmosphere. The stable char layer formation by CS/SA coating covered on the Xuan paper inhibited the heat transfer and diffusion of combustible gases, showing obvious condensed phase flame retardant action. Scanning electron microscopy confirmed that CS/SA coating on paper fiber promoted the char formation to form the stable covering layer. Furthermore, the CS/SA coating formed non-flammable gases to enhance the flame retardancy of Xuan paper, showing a certain gas phase flame retardant action. This research provides a new approach for fire-resistant Xuan paper by using fully bio-based compounds.