This research work developed in situ generated chitosan-phosphate microcapsules containing rosemary essential oil (REO) using optimized emulsion concentration via a spray drying technique. The oil release mechanism of microcapsules was studied using the Korsmeyer-Peppas model. The encapsulation efficiency of microcapsules was also calculated to examine the effect of different concentrations of core and shell materials on encapsulation efficiency. The chemical characterization of microcapsules and finished linen was carried out by utilizing standard material characterization techniques such as dynamic light scattering (DLS), energy-dispersive X-ray (EDX), Fourier-transform infrared spectroscopy (FTIR), scanning electron microscopy (SEM), and thermogravimetric analysis (TGA). Standard test procedures were employed to examine the finished fabric’s functional characteristics. It was examined if the functional qualities would hold up against repeated launderings.