Nowadays, essential oils (EOs) have a wide use in many applications such as in food, cosmetics, pharmaceutical and animal feed products. Consumers’ preferences concerning healthier and safer foodstuffs lead to an increased demand for natural products, in replacement of synthetic substances, used as preservatives, flavourings etc. EOs, besides being safe, are promising alternatives as natural food additives, and much research has been carried out on their antioxidant and antimicrobial activity. The initial purpose of this review is to discuss conventional and ‘green’ extraction techniques along with their basic mechanism for the isolation of EOs from aromatic plants. This review aims to provide a broad overview of the current knowledge about the chemical constitution of EOs while considering the existence of different chemotypes, since bioactivity is attributed to the chemical composition – qualitative and quantitative – of EOs. Although the food industry primarily uses EOs as flavourings, an overview on recent applications of EOs in food systems and active packaging is provided. EOs exhibit poor solubility in water, oxidation susceptibility, negative organoleptic effect and volatility, restricting their use. Encapsulation techniques have been proven to be one of the best approaches to preserve the biological activities of EOs and minimize their effects on food sensory qualities. Herein, different encapsulation techniques and their basic mechanism for loading EOs are discussed. EOs are highly accepted by consumers, who are often under the misconception that ‘natural’ means safe. This is, however, an oversimplification, and the possible toxicity of EOs should be taken into consideration. Thus, in the final section of the current review, the focus is on current EU legislation, safety assessment and sensory evaluation of EOs. © 2023 The Authors. Journal of The Science of Food and Agriculture published by John Wiley & Sons Ltd on behalf of Society of Chemical Industry.