Poly lactic acid (PLA) is a compostable, as well as recyclable, sustainable, versatile and environmentally friendly alternative, because the monomer of PLA-lactide (LA) is extracted from natural sources. PLA’s techno-functional properties are fairly similar to fossil-based polymers; however, in pristine state, its brittleness and delicacy during processing pose challenges to its potential exploitation in diverse food packaging applications. PLA is, therefore, re-engineered to improve its thermal, rheological, barrier and mechanical properties through nanoparticle (NP) reinforcement. This review summarises the studies on PLA-based nanocomposites (PLA NCs) developed by reinforcing inorganic metal/metallic oxide, graphite and silica-based nanoparticles (NPs) that exhibit remarkable improvement in terms of storage modulus, tensile strength, crystallinity, glass transition temperature (Tg) value, antimicrobial property and a decrease in water vapour and oxygen permeability when compared with the pristine PLA films. This review has also discussed the regulations around the use of metal oxide-based NPs in food packaging, PLA NC biodegradability and their applications in food systems. The industrial acceptance of NCs shows highly promising perspectives for the replacement of traditional petrochemical-based polymers currently being used for food packaging.