Phytochemicals are relatively small molecular species found in edible plants that may exhibit a diverse range of techno-and biofunctional attributes. In particular, there has been great interest in the identification, isolation, and utilization of dietary phytochemicals that can be used as natural pigments, antioxidants, or antimicrobials or that may improve human health and wellbeing by preventing chronic diseases, such as cardiovascular diseases, diabetes, obesity, and cancer. Relatively high levels of these phytochemicals are often present in the waste streams produced by the food and agriculture industry, such as the peels, stems, roots, or leaves of plants, that are normally discarded or turned into animal foods. From an economic and environmental perspective, it would be advantageous to convert these waste streams into value-added functional ingredients, which is consistent with the creation of a more circular economy. Bioactive phytochemicals can be isolated from agricultural and food waste streams using green extraction methods and then incorporated into plant-based functional foods or biodegradable active packaging materials. The utilization of phytochemicals in the food industry is often challenging. They may chemically degrade in the presence of light, heat, oxygen, and some pH conditions, thereby altering their biological activity. They may have low solubility in aqueous solutions and gastrointestinal fluids, thereby making them difficult to introduce into foods and leading to a low bioavailability. These challenges can sometimes be overcome using nanoencapsulation, which involves trapping the phytochemicals inside tiny food-grade particles. These nanoparticles may be assembled from edible lipids, proteins, carbohydrates, and/or surfactants and include nanoemulsions, solid lipid nanoparticles, nanoliposomes, and biopolymer nanoparticles. In this manuscript, we review a number of important phytochemicals and nanoencapsulation methods used to improve their efficacy.