Biopolymers, like polysaccharides and proteins, are sustainable and green materials with excellent film-forming potential. Bio-based films have gained a lot of attention and are believed to be an alternative to plastics in next-generation food packaging. Compared to conventional plastics, biopolymers inherently have certain limitations like hydrophilicity, poor thermo-mechanical, and barrier properties. Therefore, the modification of biopolymers or their films provide an opportunity to develop packaging materials with desired characteristics. Among different modification approaches, the application of cold plasma has been a very efficient technology to enhance the functionality and interfacial characteristics of biopolymers. Cold plasma is biocompatible, shows uniformity in treatment, and is suitable for heat-sensitive components. This review provides information on different plasma generating equipment used for the modification of films and critically analyses the impact of cold plasma on packaging properties of films prepared from protein, polysaccharides, and their combinations. Most studies to date have shown that plasma treatment effectively enhances surface characteristics, mechanical, and thermal properties, while its impact on the improvement of barrier properties is limited. Plasma treatment increases surface roughness that enables surface adhesion, ink printability, and reduces the contact angle. Plasma-treated films loaded with antimicrobial compounds demonstrate strong antimicrobial efficacy, mainly due to the increase in their diffusion rate and the non-thermal nature of cold plasma that protects the functionality of bioactive compounds. This review also elaborates on the existing challenges and future needs. Overall, it can be concluded that the application of cold plasma is an effective strategy to modify the inherent limitations of biopolymer-based packaging materials for food packaging applications.