Traditional folk therapies indicate that insects have diverse medicinal potentials. However, the therapeutic application of insect chitosan and its derivatives has not been explored. To investigate the application of chitosan and its derivatives, the carboxymethyl derivative of chitosan (CM-Ch) was extracted from two dipteran larvae species, Chrysomya albiceps and Sarcophaga aegyptiaca. The degree of deacetylation (DD) and CM-Ch functional groups were validated using Fourier-transform infrared (FTIR) spectroscopy analysis and proton nuclear magnetic resonance spectroscopy (1H NMR), respectively. The molecular weight was estimated using MALDI-TOF MS analysis. The effect of CM-Ch on the morphology and proliferation of human liver HepG2 cancer cells was assessed. IC50 of CM-Ch induced significant growth-inhibitory effects in HepG2 cells. CM-Ch treatment altered the morphology of HepG2 in a dose-dependent manner and induced apoptosis in a caspase-dependent manner. CM-Ch treatment showed no signs of toxicity, and no alterations in liver and kidney biochemical markers were observed in albino rats. A CM-Ch derivative from commercial crustacean chitosan was used to assess the efficacy of the insect-derived CM-Ch. The data presented here introduce insect CM-Ch as a promising, inexhaustible, safe derivative of chitosan with antitumor potential in liver cancer. This is the first report highlighting the anticancer activity of insect CM-Ch in hepatocellular carcinoma cells.