Gelatin-based hydrogels incorporating chitosan-encapsulated essential oil microcapsules have emerged as promising antimicrobial materials for biomedical applications. These hydrogels offer a biocompatible and biodegradable platform with enhanced antibacterial efficacy against Staphylococcus aureus (Gram-positive) and Escherichia coli (Gram-negative) bacteria. Chitosan provides inherent antimicrobial properties while acting as an effective carrier for essential oils, ensuring controlled release and prolonged antibacterial activity. The hydrogel matrix typically consists of 5–15% (w/v) gelatin and 1–5% (w/v) chitosan, and crosslinking agents at 0.1–1% (w/v) are used to enhance mechanical stability. Chitosan acts as both a structural component and an antimicrobial agent while also serving as an effective carrier for essential oils. Essential oils such as peppermint (1–2%), clove (0.5–2%), cinnamon (1–3%), and ginger (1–1.5%) were encapsulated (essential oil-to-chitosan ratio: 1:3 to 1:5), and an encapsulation efficiency of 70–90% was achieved. The antibacterial mechanism is attributed to chitosan’s electrostatic interactions with bacterial cell membranes and the sustained controlled release of bioactive compounds. The hydrogels also offer moisture retention, mechanical stability, and barrier protection, making them highly suitable for wound dressings, tissue engineering, and infection prevention. Recent studies have shown that gelatin–chitosan hydrogels incorporating essential oils not only enhance antibacterial efficacy but also support cellular proliferation and tissue regeneration. Therefore, due to their multifaceted advantages, the hydrogels represent a significant advancement in biomedical coatings. Further research is needed to optimize formulation parameters and evaluate long-term biocompatibility for clinical applications.