Microencapsulation being an emerging technique has provided effective solution to the challenges faced by pharmaceutical, cosmetic, food agriculture and textile industries to deliver ingredients in their active forms to the target sites. Chitosan is a non-toxic, biodegradable and biocompatible amino polysaccharide which makes it useful for the encapsulation of various active ingredients with potential applications. Chitosan coating on food products, for example, gives them protection from possible antimicrobial attacks, antioxidants and extended shelf life. Likewise, its coating on pharmaceutics has valuable applications in preserving drug and their targeted delivery. In this review, we discuss the formation of chitosan, its properties, microencapsulation process, micro-capsular morphologies, selection of core and shell materials in addition to the process of chitosan encapsulation of various active ingredients and their applications in various fields of science and technology.