Chitosan has received much attention for its role in designing and developing novel derivatives as well as its applications across a broad spectrum of biological and physiological activities, owing to its desirable characteristics such as being biodegradable, being a biopolymer, and its overall eco-friendliness. The main objective of this review is to explore the recent chemical modifications of chitosan that have been achieved through various synthetic methods. These chitosan derivatives are categorized based on their synthetic pathways or the presence of common functional groups, which include alkylated, acylated, Schiff base, quaternary ammonia, guanidine, and heterocyclic rings. We have also described the recent applications of chitosan and its derivatives, along with nanomaterials, their mechanisms, and prospective challenges, especially in areas such as antimicrobial activities, targeted drug delivery for various diseases, and plant agricultural domains. The accumulation of these recent findings has the potential to offer insight not only into innovative approaches for the preparation of chitosan derivatives but also into their diverse applications. These insights may spark novel ideas for drug development or drug carriers, particularly in the antimicrobial, medicinal, and plant agricultural fields.