In response to the environmental pollution caused by non-degradable and non-recyclable plastic packaging films (PPFs) and the resulting health concerns due to the migration of microplastics into food, the development of biodegradable food packaging films has gained great attention. Chitosan has been extensively utilized in the food industry owing to its abundant availability, exceptional biocompatibility, degradability, and antimicrobial properties. Chitosan-essential oil composite films (CEOs) represent a promising avenue to replace conventional PPFs. This review provides an overview of the advancements in CEOs over the past decade, focusing on the effects of essential oils (EOs) on CEOs in terms of antimicrobial activity, antioxidant effect, gas barrier, light barrier, and mechanical properties. It also offers insights into the controlled release of EOs in CEOs and summarizes the application of CEOs in fresh food preservation.