Biodegradable polymer nanocomposites (BPNCs) are advanced materials that have gained significant attention over the past 20 years due to their advantages over conventional polymers. BPNCs are eco-friendly, cost-effective, contamination-resistant, and tailorable for specific applications. Nevertheless, their usage is limited due to their unsatisfactory physical and mechanical properties. To improve these properties, nanofillers are incorporated into natural polymer matrices, to enhance mechanical durability, biodegradability, electrical conductivity, dielectric, and thermal properties. Despite the significant advances in the development of BPNCs over the last decades, our understanding of their dielectric, thermal, and electrical conductivity is still far from complete. This review paper aims to provide comprehensive insights into the fundamental principles behind these properties, the main synthesis, and characterization methods, and their functionality and performance. Moreover, the role of nanofillers in strength, permeability, thermal stability, biodegradability, heat transport, and electrical conductivity is discussed. Additionally, the paper explores the applications, challenges, and opportunities of BPNCs for electronic devices, thermal management, and food packaging. Finally, this paper highlights the benefits of BPNCs as biodegradable and biodecomposable functional materials to replace traditional plastics. Finally, the contemporary industrial advances based on an overview of the main stakeholders and recently commercialized products are addressed.