Background: The point of the present investigation was to blend effective chitosan nanoparticles (CNPs) loaded with Pterocarpus marsupium (PM) heartwood extract and evaluate its biomedical applications. Various plant extract concentrations (PM-CNPs-1, PM-CNPs-2, PM-CNPs-3) are used to synthesize chitosan nanoparticles and optimized to acquire a stable nanoparticle formulation. The entrapment efficiency and in vitro release studies of the plant extract encapsulated in CNPs are estimated. The PM-loaded CNPs were characterized by X-ray diffraction, dynamic light scattering (DLS), Fourier transform infrared spectroscopy (FT-IR), scanning electron microscopy (SEM), and transmission electron microscopy (TEM). The synthesized chitosan nanoparticles were evaluated for their alphaamylase inhibitory activity and inhibition of albumin denaturation activity. Results: The XRD pattern of PM-CNPs shows less number of peaks at low intensity due to the interaction of chitosan with sodium tripolyphosphate. The FT-IR spectrum with peaks at 1639.55 and 1149.02 cm −1 confirms the formation of chitosan nanoparticles. The size of the nanoparticles ranges between 100 and 110 nm with spherical shape illustrated by SEM and TEM analysis. The nanoparticle formulation with 10% plant extract concentration (PM-CNPs-2) showed optimum particle size, higher stability, enhanced entrapment efficiency, and sustained drug release characteristics. Synthesized chitosan nanoparticles have shown a significant increase in alpha-amylase inhibition and appreciable anti-inflammatory activity as measured by inhibition of protein denaturation. Conclusions: The investigation reports the eco-friendly, cost-effective method for synthesizing chitosan nanoparticles loaded with Pterocarpus marsupium Rox.b heartwood extract.