Driven by the continuous search for materials with antibacterial and anticancer applications, this study focuses on the fabrication of nanocomposite films using chitosan as the basis material, with the addition of gadolinium oxide nanoparticles at varying weight percentages (5 and 10 wt.% Gd2O3/CS). The films were made using the coprecipitation‐solution cast approach. The structural characteristics of the Gd2O3/CS films that were formed were investigated and confirmed using a range of analytical techniques, including Fourier transform infrared, X‐ray diffraction, and scanning electron microscopy–energy‐dispersive X‐ray spectroscopy. The X‐ray diffraction study provided unambiguous evidence of an increased degree of crystallinity in chitosan with the inclusion of gadolinia. The particle size was determined using the Debye–Scherrer formula, resulting in an estimated value of 36 nm. Following this, a thorough examination was undertaken to evaluate the antibacterial effectiveness against one strain of Gram‐positive bacteria and two strains of Gram‐negative bacteria. Our research has revealed that the efficacy of the inspected Gd2O3/CS as bactericides is superior to that of CS alone. Furthermore, the MCF‐7, HCT‐116, and HepG‐2 cell lines exhibited anticancer activity when exposed to the Gd2O3/CS nanocomposites. In addition, nanocomposites exhibit significant antioxidant activity in comparison with the conventional vitamin C. These findings provide evidence for the viability of our nanocomposites in combating breast cancer.