Chitosan, derived from the deacetylation of chitin, is the second most widely used natural polymer, valued for its nontoxic, biocompatible, and biodegradable properties. These attributes have driven extensive research into diverse applications of chitosan and various derivatives. The key characteristics of chitosan muco-adhesion, permeability enhancement, drug release modulation, and antimicrobial activity are primarily due to its amino and hydroxyl groups. However, the limited solubility of raw chitosan in water and most organic solvents has posed challenges for broader application. Numerous chemically modified derivatives have been developed to address these inadequacies with improved physical and chemical properties. Among these derivatives, chitosan nanoparticles have emerged as versatile drug carriers with precise release kinetics and the capacity for targeted delivery, greatly enhancing drug efficacy and safety profiles for therapeutic applications. Due to these unique physicochemical properties, chitosan and chitosan nanoparticles are promising for improved drug delivery, vaccine administration, transplantation, gene therapy, and diagnostics. This review examines the physicochemical properties and bioactivities of chitosan and chitosan nanoparticles, emphasizing their broad-ranging biomedical applications.