Biopolymers have been serving the mankind in various ways since long. Over the last few years, these polymers have found great demand in various domains which includes biomedicine, tissue engineering, biosensor fabrications etc. because of their excellent biocompatibility. In this context, chitosan has found global attention due to its environmentally benign nature, biocompatibility, biodegradability, and ease of availability. In last one decade or so, extensive research in active biomaterials, like chitosan has led to the development of novel delivery systems for drugs, genes, and biomolecules; and regenerative medicine. Additionally, chitosan has also witnessed its usage in functionalization of biocompatible materials, nanoparticle (NP) synthesis, and immobilization of various bio-recognition elements (BREs) to form active bio-surfaces with great ease. Keeping these aspects in mind, we have written a comprehensive review which aims to acquaint its readers with the exceptional properties of chitosan and its usage in the domain of biomedicine, tissue engineering, and biosensor fabrication. Herein, we have briefly explained various aspects of direct utilization of chitosan and then presented vivid strategies towards formulation of chitosan based nanocomposites for biomedicine, tissue engineering, and biosensing applications.