Biologically active substances (BASs) are used as novel ingredients to design functional foods. These functional foods are alternate approaches to treat or cure chronic diseases. However, the application of BASs is limited due to their hydrophobic nature, low bioavailability, sensitivity to gastric acid, and environmental conditions (i.e., high temperatures, radiation, pH, and oxygen). Thus, research has been channeled to find ways of curbing these limitations. This review provides an overview of the modern methods for BAS encapsulation, carrier classifications, benefits, and drawbacks as well as the biosafety of encapsulated BASs. Encapsulation of BASs into organic/inorganic carriers or composites overcomes the limitations mentioned above. In addition, encapsulation enables the controlled release of active compounds to target cells. The market for encapsulated foods has grown globally at a significant pace due to their various applications as functional foods, dietary supplements, and other products. It is estimated that by 2027, the market worth of encapsulated foods will be valued at $17 billion.