Nanoencapsulated bael fruit (Aegle marmelos L. Correa (Family: Rutaceae)) extracts reveal novel prospects in the development of dietary supplements with improved biological activities in the field of the food industry. The main objectives of this study were to prepare and characterize aqueous, ethanol, 50% ethanol, and 50% acetone extracts of bael fruit encapsulated alginate nanoparticles and investigate the effect of encapsulation on in vitro release of polyphenols, antidiabetic, antioxidant, and anti‐inflammatory activities, and their stability. Bael fruit extracts encapsulated alginate nanoparticles were prepared using the ionic gelation method. Characterization, in vitro release profiles of polyphenols, determination of antidiabetic, anti‐inflammatory, antioxidant activity, and accelerated stability were conducted. The results of the characterization confirmed the successful encapsulation of extracts of bael fruit in the alginate matrix. The aqueous extract of bael fruit encapsulated alginate nanoparticles exhibited a more controlled slow‐release profile, accounting for 21.82% ± 1.17% and 48.14% ± 0.52% of polyphenols at solutions of pH 1.2 and pH 6.8, respectively. In general, the results of the bioactivity assessment suggested that nanoencapsulation could facilitate the enhancement of its antidiabetic, antioxidant, and anti‐inflammatory properties. The results of thermogravimetric analysis and thin layer chromatography fingerprint showed the stability of aqueous bael fruit extract encapsulated alginate nanoparticles at 27 and 4°C over a month. In summary, the results of this study revealed the potency of nanoencapsulated aqueous extract of bael fruit to develop a dietary supplement with improved antidiabetic, antioxidant, and anti‐inflammatory activities.Practical ApplicationThe encapsulation of bael fruit extracts into a nanocarrier enhances bioactivities and promotes the controlled release of bioactive compounds. This could be useful in the future food industry, based on scientifically proven data, and inspire the market by means of the development of dietary supplements. Overall, the results would facilitate the formulation of novel commercially elegant nanoencapsulated dietary supplements with improved potential to manage a healthy life.