Chitosan–ZnO composites were prepared by hydrothermal method using commercial chitosan, 0.1M zinc nitrate and 1.6M sodium hydroxide. The advantage of this method is direct and a relatively easy ways of getting large amounts of chitosan–ZnO at lower temperature. Presence of chitosan was confirmed by FTIR spectroscopic analysis and crystalline structure of ZnO by XRD pattern. Photoluminescence spectra showed a yellow luminescence at ~620–630nm and blue-violet emission at ~410–430nm. TG/DTA analysis of the prepared chitosan–ZnO composites revealed higher thermal stability than commercial chitosan. SEM analysis shows that more number of chitosan–ZnO composite particles was dispersed within the micrometer scale. Antibacterial activity of chitosan–ZnO composite shows higher for gram-positive bacterium compared to gram-negative bacterium. The chitosan–ZnO composite cross linked cotton fabric exhibits very good antimicrobial activities and better durability than chitosan cross linked cotton fabric. To conclude, the preparation of chitosan–ZnO composites by this way will give bulk quantity with low cost for industrial bio-finishing.