Nanocomposite films and coatings with improved properties were produced from ultrasonic dispersed chitosan and hydrophilic bentonite nanoclay. Bio‐hybrid coatings were applied onto argon–plasma‐activated LDPE coated paper. The intercalation of chitosan in the silicate layers was confirmed by the decrease of diffraction angles as the chitosan/nanoclay ratio increased. Nanocomposite films and multilayer coatings had improved barrier properties against oxygen, water vapor, grease, and UV‐light transmission. Oxygen transmission was significantly reduced under all humidity conditions. In dry conditions, over 99% reduction and at 80% relative humidity almost 75% reduction in oxygen transmission rates was obtained. Hydrophilic chitosan was lacking the capability of preventing water vapor transmission, thus total barrier effect of nanoclay containing films was not more than 15% as compared with pure chitosan. Because to very thin coatings (≤1 μm), nanoclay containing chitosan did not have antimicrobial activity against test strains. All coating raw materials were “generally recognized as safe” (GRAS) and the calculated total migration was in all cases ≤6 mg/dm2, thus the coatings met the requirements set by the packaging legislation. Processing of the developed bio‐hybrid nanocomposite coated materials was safe as the amounts of released particles under rubbing conditions were comparable with the particle concentrations in a normal office environment.