Chitosan has shown remarkable progress in the drug delivery field, exhibiting impressive biodegradability, biocompatibility, antibacterial ability, and ease of creating versatile scaffolding systems. Chitosan scaffolds are widely used for delivery of drugs, antimicrobial agents, and biomolecules. This review explores the extensive potentiality of chitosan scaffolds for localized or targeted drug delivery for regenerative medicine and tissue regeneration. This review highlights the fabrication methods such as freeze-drying, solvent casting, particulate leaching, electrospinning, and 3D printing that support the advancement of chitosan-based scaffolds with structural and mechanical properties. This review concentrates on the antimicrobial activity of chitosan scaffolds with antibiotics, metals/metal-organic frameworks, and bioceramics that are used combined or alone to impart antibacterial and antifungal properties. In addition, chitosan scaffolds demonstrate the efficacy in anti-inflammatory and anticancer activities and as a promising method for the delivery of biomolecules including growth factors, proteins and peptides, nucleic acids, and lipids for regenerative medicine and tissue regeneration.