Gamma-glutamyl transpeptidase from Bacillus atrophaeus was covalently immobilized onto chitosan-coated magnetite nanoparticles (Ch-Fe3O4 MNPs) by glutaraldehyde crosslinking. Optimization of protein concentration (500 μg/mL) and reaction pH (10.0) resulted in 100% binding (20 ± 2.01 μg protein/mg MNPs) and 100% activity recovery (3.01 ± 0.21 U/mg MNPs). Biophysical characterization of the prepared MNPs revealed their nanocrystalline structure with a particle size distribution of 63–295 nm and spherical morphology; magnetization curves indicated superparamagnetic properties. The pH (10.0) and temperature (50 °C) optima and stability of the immobilized enzyme were akin to the free enzyme, while a higher Km (0.28 ± 0.01 mM) than the free enzyme (0.21 ± 0.02 mM) indicated reduced substrate affinity. Additionally, the immobilized enzyme displayed improved storage stability at 4 °C retaining 95% residual activity after 60 days. Finally, its application in the synthesis of γ-D-glutamyl-L-tryptophan (SCV-07) was demonstrated using 4 μg/mL immobilized enzyme, 50 mM D-Gln, and 75 mM L-Trp at pH 10.0, 37 °C/70 rpm for 6 h resulting in a high conversion rate of ∼70% (35.2 ± 1.7 mM product). After 11 successive cycles of SCV-07 synthesis, similar product conversion was obtained till 8 cycles yielding 265.9 ± 5.9 mM total product. Therefore, the developed nanobiocatalyst could be utilized in the sustainable synthesis of γ-glutamyl compounds.