The growing interest in biopolymer encapsulants offers a sustainable alternative to synthetic packaging, addressing concerns over plastic pollution and microplastic-related health risks while improving bioactive compound stability. However, poor moisture barrier properties, low mechanical strength, and high production costs hinder their large-scale applications. To address these challenges, chemical and physical functionalization techiques have been developed to enhance material performance, encapsulation efficiency, and the overall functionality of core materials in food applications. Chemical modifications, including cross-linking, grafting, Maillard reactions, phosphorylation, and carboxymethylation, alongside physical approaches such as blending, coating, and nanoparticle incorporation, have significantly improved material performance, stability, and controlled release of bioactives in food systems. Additionally, emerging tools such as machine learning show potential for optimising functionalization processes and predicting performance outcomes. Despite these advances, challenges related to scalability, regulatory compliance, and consumer acceptance persist. Overall, functionalized biopolymers present a promising pathway towards sustainable, high-performance food packaging and delivery systems.