This paper describes the polymerization of thiophene monomer with various loadings of chitosan nano-powders via the simple in-situ method. The formation of polythiophene (PTH)/chitosan (CS) nanocomposites were analysed by FTIR, XRD and FESEM. The FT-IR analysis confirm the chemical interaction between polythiophene and the chitosan nano-powders. X-ray diffraction study of PTH/chitosan showed the uniform positioning of sharp and distinct crystalline peaks of chitosan in PTH. The FESEM micrographs confirm the structural and morphological changes of composites due to the in-situ polymerization of CS in PTH. Thermogravimetric analysis revealed that the rate of decomposition of the composite was lower as compared to PTH and the thermal resistance of the composites decreases with the contents of CS nano-powders. The A.C electrical resistivity and dielectric constant of PTH and PTH/CS nanocomposite have been studied. The results obtained showed that PTH/CS composite had lower electrical resistance than PTH. The improvement in electrical conductivity of polymer nanocomposite indicated the proper insertion of nano-CS powders in the polymer. Conductivity and dielectric constant of the nanocomposite enhanced with the concentration of nano-powder in the polymer and maximum electrical properties were observed for composites with 10 wt% loading of CS. The gas sensing behaviour of PTH/CS composite with the various loadings of CS particles against the ammonia gas was examined. The synthesized polymer nanocomposites displayed an excellent sensitivity and fast response to ammonia gas at room temperature. Among the nanocomposites, the highest gas sensing performance was observed for polythiophene with 10 wt% nano-chitosan particles.