The development of nanomaterials has been speedily established in recent years, yet nanoparticles synthesized by traditional methods suffer unacceptable toxicity and the sustainability of the procedure for synthesizing such nanoparticles is inadequate. Consequently, green biosynthesis, which employs biopolymers, is gaining attraction as an environmentally sound alternative to less sustainable approaches. Chitosan-encapsulated nanoparticles exhibit exceptional antibacterial properties, offering a wide range of uses. Chitosan, obtained from shrimp shells, aided in the environmentally friendly synthesis of high-purity zinc oxide nanoparticles (ZnO NPs) with desirable features such as the extraction yield (41%), the deacetylation (88%), and the crystallinity index (74.54%). The particle size of ZnO NPs was 12 nm, while that of chitosan–ZnO NPs was 21 nm, and the bandgap energies of these nanomaterials were 3.98 and 3.48, respectively. The strong antibacterial action was demonstrated by ZnO NPs, chitosan–ZnO NPs, and chitosan–ZnO/PVP, particularly against Gram-positive bacteria, making them appropriate for therapeutic use. The photocatalytic degradation abilities were also assessed for all nanoparticles. At a concentration of 6 × 10–5 M, chitosan removed 90.5% of the methylene blue (MB) dye, ZnO NPs removed 97.4%, chitosan-coated ZnO NPs removed 99.6%, while chitosan–ZnO/PVP removed 100%. In the case of toluidine blue (TB), at a concentration of 4 × 10–3 M, the respective efficiencies were 96.8%, 96.8%, 99.5%, and 100%, respectively. Evaluation of radical scavenger activity revealed increased scavenging of ABTS and DPPH radicals by chitosan–ZnO/PVP compared to individual zinc oxide or chitosan–ZnO, where the IC50 results were 0.059, 0.092, 0.079 mg/mL, respectively, in the ABTS test, and 0.095, 0.083, 0.061, and 0.064 mg/mL in the DPPH test, respectively. Moreover, in silico toxicity studies were conducted to predict the organ-specific toxicity through ProTox II software. The obtained results suggest the probable safety and the absence of organ-specific toxicity with all the tested samples.