The encapsulation of pomegranate peel extract (PPE) in chitosan nanoparticles (CSNPs) is an advantageous strategy to protect sensitive constituents of the extract. This study was aimed to develop PPE-loaded CSNPs and characterize their physical, structural morphology, antioxidant and antimicrobial properties. Spherical NPs were successfully synthesized with a mean diameter of 174–898 nm, a zeta potential (ZP) of +3–+36 mV, an encapsulation efficiency (EE) of 26–70%, and a loading capacity (LC) of 14–21% depending on their loaded extract concentrations. Based on these results, CSNPs with chitosan:PPE ratio of 1:0.50 (w/w) exhibited good physical stability (ZP = 27 mV), the highest loading (LC = 20%) and desirable encapsulation efficiency (EE = 51%), and thus, selected as optimally loaded NPs. The FTIR analysis of PPE-CSNPs demonstrated no spectral changes indicating no possible chemical interaction between the PPE and CSNPs, which confirms that the PPE was physically entrapped within NPs. Moreover, FTIR spectra of pure PPE showed specific absorption bands (at 3293–3450 cm−1) attributed to the incidence of phenolic compounds, such as tannic acid, ellagic acid and gallic acid. Total phenolic content (TPC) and antioxidant analysis of selected CSNPs revealed that the encapsulated NPs had significantly lower TPC and antioxidant activity than those of pure PPE, indicating that CSNPs successfully preserved PPE from rapid release during the measurements. Antibacterial tests indicated that pure PPE and PPE-loaded CSNPs effectively retarded the growth of Gram-positive S. aureus with a minimum inhibitory concentration (MIC) of 0.27 and 1.1 mg/mL, respectively. Whereas Gram-negative E. coli, due to its protective cell membrane, was not retarded by pure PPE and PPE-CSNPs at the MIC values tested in this study. Gas chromatography-mass spectroscopy analysis confirmed the incidence of various phytochemicals, including phenolic compounds, fatty acids, and furfurals, with possible antioxidant or antimicrobial properties. Overall, CSNPs can be regarded as suitable nanomaterials for the protection and controlled delivery of natural antioxidants/antimicrobials, such as PPE in food packaging applications.