Cereal grains are frequently attacked by microorganisms and insects during storage and processing, which negatively affects their quality, safety, and market value. Therefore, protecting stored grains from microbial contamination is crucial for food industries, farmers, public health associations, and environmental agencies. Due to the negative impact of synthetic gray chemicals, antimicrobial plant-based essential oils (EOs) can serve as alternative, safer, environmentally friendly preservatives that can prolong the shelf life of cereals. However, high volatility, low solubility, hydrophobicity, and quick oxidation limit their practical applicability. Using nanotechnology for the nanoencapsulation of EOs into polymeric matrices allows sustained release and ensures targeted delivery without significantly altering the organoleptic attributes of cereals, making EOs a new-generation green preservative. This ultimately overcomes the challenges of practical applications. The application of nanoencapsulated EOs in grain storage provides an effective and novel defense against microbes, insects, and other contaminants. Hence, the current review thoroughly examines the preservative potential of nanoencapsulated EOs in terms of antimicrobial and insecticidal efficacy for protecting stored cereal grains. It also highlights the challenges encountered during application and the safety concerns of using nanoencapsulated EOs in protecting cereal grains during post-harvest storage.