Essential oils (EOs) obtained from plant resources have potential use in the arena of food packaging and preservation owing to their excellent antioxidant and antimicrobial properties. However, direct uses of essential oils in food industries are limited because of their low solubility in water and loss of bioactivities in unfavorable environmental conditions, which could be overcome by encapsulation or blending with polymeric matrix. Combining biopolymeric materials with essential oils obtained from agro processing byproducts and wastes holds the promise of fostering a more sustainable systems that will ultimately support UN Sustainable Development Goals. The current review offers a concise and critical understanding on the chemistry, biological activities, and use of EOs in developing biopolymer-based active films and coatings for food packaging and preservation applications. The effect of addition of EOs, and their nanoemulsion on the physicochemical, optical, mechanical, barrier, antimicrobial and antioxidant properties of the biopolymeric materials have also been discussed. Use of EOs in biopolymeric matrix can enhance hydrophobicity, tensile strength, barrier properties, and optical characteristics such as color, gloss, and transparency. Encapsulation of EOs offer sustained release, protection of volatile compounds, and enhances its efficiency.