As an alternative to conventional plastic packaging, the concept of developing blend films with bio-based materials seems to be an environmentally friendly approach. In the present study, blend films were prepared using ethanolic extract of Gracilaria crassa (GCE) with chitosan (CS) and silver nanoparticles (AgNPs). The developed films were evaluated based on the physical, mechanical, structural, barrier and antioxidant indices. The films were slightly yellowish in color (b* ranges 39.69–53.08) and smooth textured. The FTIR spectra confirmed the intermolecular interaction between film components and the combination of CS and GCE occurred by means of -OH groups and hydrophobic interaction due to the cross-linking effect of the plasticizer (glycerol). The antioxidant properties of the films were investigated via DPPH assay and total phenolic contents showed significant improvement (p < 0.05) upon incorporation of GCE. Similar observations were made for tensile parameter (37.29 ± 1.22–38.39 ± 1.09) compared to the control (29.71 ± 1.66). The thermal pattern of blended films showed greater stability with Tg of 112.6 °C. The formulated films significantly extended the shelf-life of shrimp nuggets in refrigerated storage (4 °C) up to 9 days. The study reveals that the incorporation of GCE/AgNPs with chitosan films can be an active packaging system in the field of sustainable food packaging technology.