The increasing demand for sustainable alternatives to petroleum-based food packaging has led to the advancement of natural fiber-reinforced polymer composites (NFPCs) as environmentally friendly solutions. This chapter examines the incorporation of natural fibers derived from plant, animal, and mineral sources into biodegradable polymer matrices for the development of functional food packaging materials. This study critically examines the mechanical properties of different fiber types and the modification techniques employed to improve fiber-matrix compatibility. The chapter outlines both conventional and advanced processing methods, such as extrusion, compression molding, 3D printing, and electrospinning, emphasizing their effects on material performance. The suitability of NFPCs for food packaging applications is evaluated based on key performance characteristics, including mechanical strength, barrier properties, thermal stability, antimicrobial activity, and biodegradability. This chapter examines their function in active and intelligent packaging systems, which include features such as oxygen scavenging, moisture regulation, and freshness indicators to improve food preservation. Despite notable advancements, challenges remain, including fiber variability, the maintenance of consistent barrier properties, and the need for cost-effective scalability. Future research directions focus on innovative fiber sources, enhanced compatibilization methods, and the incorporation of nanotechnology to create intelligent, high-performance packaging solutions that adhere to circular economy principles.