The present study investigates the efficacy of chitosan and glyoxal-crosslinked chitosan (Chi-Gly) as reinforcing agents for enhancing the mechanical, physical, and functional properties of recycled paper. The research aims to evaluate the comparative performance of these two forms of chitosan in imparting strength characteristics and improved functionality to recycled paper substrates. Chitosan and Chi-Gly solutions prepared via glyoxal crosslinking were incorporated into recycled pulp suspensions at varying dosages. Laboratory handsheets were fabricated, and their properties were systematically evaluated through mechanical testing, morphological analysis, wettability measurements, and antibacterial assays. The results demonstrated significant improvements in the tensile index, burst index, and bending resistance for the chitosan and Chi-Gly treated papers, with the Chi-Gly exhibiting superior reinforcement. Notably, the Chi-Gly treated paper exhibited a higher wet tensile index and lower water absorption capacity than the control. SEM analysis revealed a denser, more cohesive fiber network facilitated by chitosan and Chi-Gly, aiding the reinforcement. The treated papers exhibited reduced hydrophobicity and pronounced antibacterial activity against E. coli (a gram-negative bacterium) and S. aureus (a gram-positive bacterium), with the Chi-Gly treatment outperforming chitosan. Notably, the treatments improved the functional properties without negatively impacting optical brightness. The findings highlight the synergistic effects of glyoxal crosslinking on chitosan’s reinforcing ability and the potential of these biopolymers as sustainable and multifunctional additives for the recycled paper industry.