Biosynthesis using plant extract is known as one of the potential techniques to synthesize different zinc oxide nanoparticles (ZnO-NPs) in different size ranges. ZnO-NPs were synthesized using Plumeria leaf extract with laboratory chemical reagent Zn(CH3COO)2 and followed by the micro-encapsulation of biosynthesized ZnO-NPs using chitosan and cellulose with TEOF as a cross-linker employing freeze gelation method. Both neat and encapsulated ZnO-NPs have been characterized by FT-IR, UV spectroscopy, XRD, and SEM techniques. The UV-spectroscopic analysis confirmed the characteristic band of ZnO-NPs at 356.0 nm, and FIIR showed the peaks at 544 cm−1 and 545 cm−1 corresponding to the Zn–O bond. Powder XRD pattern showed the wurtzite structure of ZnO and gave the calculated average crystallite size as of 27.23 nm. In the case of encapsulated ZnO-NPs, the UV–visible spectrum showed two strong absorption peaks at 232.5 nm, 242.5 nm, and a weak peak at 357 nm. A broad peak at 3333 cm−1 in FT-IR spectra is either due to N–H stretching in the amide group of chitosan or hydroxyl group in encapsulated ZnO-NPs. It was observed that chitosan loaded ZnO-NPs had higher entrapment efficiency (81.98%) at 15 mL of plant extract. The kinetic profile in the release of ZnO particles out from encapsulated ZnO-NPs was observed to follow four kinetic paths in 120 min at pH 1.2. The particle release followed the zero-order kinetic in the first 50 min and then followed by Hixson–Crowell kinetic in the next 50 min with two different rate constants, 2.6 × 10−3 min−1 and 13 × 10−3 min−1, before it backs to the zero-order kinetics. This study shows that ZnO nanoparticles can easily be biosynthesized and encapsulated for use in the pharmaceutical industry.