To ensure food and environmental safety, biodegradable packaging materials from various natural polymers are being used to preserve the high quality of foods and to increase their shelf life in addition to environmental safety in terms of biodegradability. However, these natural polymers have some disadvantages in functionality. There are many ways to improve functionality, one such way is the addition of essential oils. Therefore, this research work was done to investigate the effectiveness of four diverse essential oils (EOs), namely, lemon‐grass oil (LGO), tea‐tree oil (TTO), thyme oil (THO), and basil oil (BO) in chitosan‐based composite films. The chitosan as a biopolymer, polyvinyl alcohol (PVA) as a compatibilizer, and four different essential oils@0.3% were blended to form composite food packaging films. These nanofilms had better mechanical strength, elasticity, and film thickness. Thermal stability and change in the weight of chitosan alone and composite films were determined by thermogravimetric analysis (TGA). Scanning electron microscopy (SEM) was used to analyze the change in film surface morphology. The Fourier transform infrared (FTIR) spectrum of the base polymer exhibits characteristic peaks at 3400 cm−1 indicating the occurrence of hydrogen‐bonded OH groups, and peaks at 1500–1600 cm−1 corresponding to the amide II band and CO stretch of the acetyl group. Whereas TGA results confirmed the thermal stability of PVA and EO blended films compared to chitosan alone films. The biodegradability of antimicrobial chitosan‐based films exhibited around 15%–19% percentage of degradation in PVA blended films whereas chitosan alone degraded up to 32% after 30 days. Water vapor transmission was high in chitosan alone film (1.9%) and 0.25% in PVA/EO blended films displaying enhancement in hydrophobic qualities of the developed films due to change in hydrophobicity by EO addition. The chitosan and PVA alone films were transparent whereas EO blended films exhibited yellow coloration and became less transparent due to the oil droplets dispersion in films. The shelf life of tomato, bread, and paneer was better in lemongrass and tea tree oil‐incorporated films during storage.