Nations all over the world are imposing ban on single-use plastics, which are difficult to recycle and lead to creations of nonsustainable and nondegradable piles. To match the requirement in the market, suitable food packaging alternatives have to be developed that are biodegradable and environment-friendly. The current work is designed for the fabrication of a novel nanocomposite by blending xanthan gum in a chitosan matrix and reinforcing it with ZnO nanoparticles, through a solution casting method. Surface morphology of the film was investigated through field emission scanning electron microscopy, along with energy-dispersive X-ray spectroscopy mapping, and characterized through thermogravimetric analysis, Fourier transform infrared (FTIR) spectroscopy, mechanical testing, and ultraviolet spectroscopy. FTIR spectroscopy analysis corroborated the interaction between the components and the H-bond formation. Polyelectrolyte complex formation materializes between the oppositely charged chitosan and xanthan gum, and further nanoparticle incorporation significantly improves the mechanical properties. The synthesized nanocomposite was found to have increases in the tensile strength and elongation at break of pure chitosan by up to 6.65 and 3.57 times, respectively. The transmittance percentage of the bionanocomposite film was reduced compared to that of the pure chitosan film, which aids in lowering the oxidative damage brought on by UV radiation in packed food products. Moreover, the film also showed an enhanced barrier property against water vapor and oxygen gas. The film was totally biodegradable in soil burial at the end of the second month; it lost almost around 88% of its initial weight. The fabricated film does not pose a threat to the environment and hence has great potential for application in the future sustainable food packaging industry.