Hybrid materials based on metals and natural polymers are a promising class of nanocomposites; there is an increasing interest in metal nanoparticles (NPs) due to some fascinating characteristics associated with their nanosizes such as optical, conducting, catalytic, mechanical, sensing and superparamagnetic properties. Despite these favorable properties, the natural tendency of NPs for aggregation, high reactivity due to surface charges, and high rate of toxicity are limiting their applicability in biomedical sector. Chitosan, a naturally available amino polysaccharide biopolymer obtained from the exoskeleton of crustaceans (crabs and shrimp) and cell walls of fungi, displays unique polycationic, porous, chelating, bioadhesive and film-forming properties. The in-built characteristics of chitosan biopolymer can be utilized to alter the negative shades of metal NPs, thereby enhancing the applications in many different areas. The incorporation of chitosan significantly affects the steric stabilization of metal colloids, creates extra functional groups for biomolecule conjugation, renders the NPs suitable for bio-markers, protects metal ions from further oxidation/reduction by means of polymer coordination and has a control over toxicity. Thus by taking advantage of the additional features offered by the combination of chitosan and metal NPs, this report is designed to provide an overview about the metal NPs type, synthesis and applications in bioengineering and biomedical sector. Starting with the influencing properties due to their combination, we further reviewed the literature related to chitosan and metal NPs applicable for medicine with a specific focus on cancer diagnosis and treatment, advanced drug delivery, tissue engineering and surgical aids, to mention some.