In the present study, apple peel polyphenols (APP) were incorporated into chitosan (CS) to develop a novel functional film. Scanning electron microscopy, Fourier transform-infrared spectroscopy and thermogravimetric analyses were performed to study the structure, potential interaction and thermal stability of the prepared films. Physical properties including moisture content, density, color, opacity, water solubility, swelling ration and water vapor permeability were measured. The results revealed that addition of APP into CS significantly improved the physical properties of the film by increasing its thickness, density, solubility, opacity and swelling ratio whereas moisture content and water vapor permeability were decreased. Tensile strength and elongation at break of the CS-APP film with 1% APP was 16.48MPa and 13.33%, respectively, significantly lower than those for CS control film. Thermal stability of the prepared films was decreased while antioxidant and antimicrobial activities of the CS-based APP film were significantly increased. CS-APP film with 0.50% APP concentration exhibited good mechanical and antimicrobial properties, indicating that it could be developed as bio-composite food packaging material for the food industry.