Nanotechnology based antimicrobial drugs are developed to enhance their properties to combat multidrug resistant microbes. Carbenoxolone (CBX) is a semi-synthetic derivate of a natural substance from the licorice plant, with anti- (inflammatory, fungal, viral, microbial, fibrotic and cancer) properties. Though used to treat gastric ulcers, its low aqueous stability, low bioavailability and toxicity limited the drug's utility. To enhance its antimicrobial activity and reduce cytotoxicity, a controlled release nanoformulation was developed using natural biodegradable polymer chitosan (CS) as a carrier which is biocompatible, nontoxic with placid antimicrobial property. UV–visible spectroscopy, electron microscopy, and Fourier transform infrared spectroscopy were used for characterization of the resultant CS-CBX nanoparticles (NPs). They were spherical with uniform dispersion, ~200 nm in size with surface charge of +18.6 mV and drug encapsulation of >80%. Drug release kinetics exhibited a controlled release of 86% over 36 h following zero order kinetics. The anti-microbial activity against common pathogenic Gram −ve and +ve bacteria and yeast increased ~2-fold with a concomitant 4-fold reduction in cytotoxicity assessed using human lung adeno carcinoma (A549) cells. This study demonstrates the affirmative aspects of CS-CBX NPs as a promising antibacterial agent and may facilitate repositioning of the drug for diverse applications.