In the present work, copper nanoparticles (CuNPs) were in situ generated inside cellulose matrix using Terminalia catappa leaf extract as a reducing agent. During this process, some CuNPs were also formed outside the matrix. The CuNPs formed outside the matrix were observed with transmission electron microscope (TEM) and scanning electron microscope (SEM). Majority of the CuNPs formed outside the matrix were in the size range of 21-30nm. The cellulose/CuNP composite films were characterized by Fourier transform infrared spectroscopic, X-Ray diffraction and thermogravimetric techniques. The crystallinity of the cellulose/CuNP composite films was found to be lower than that of the matrix indicating rearrangement of cellulose molecules by in situ generated CuNPs. Further, the expanded diffractogram of the composite films indicated the presence of a mixture of Cu, CuO and Cu2O nanoparticles. The thermal stability of the composites was found to be lower than that of the composites upto 350°C beyond which a reverse trend was observed. This was attributed to the catalytic behaviour of CuNPs for early degradation of the composites. The composite films possessed sufficient tensile strength which can replace polymer packaging films like polyethylene. Further, the cellulose/CuNP composite films exhibited good antibacterial activity against E.coli bacteria.