Environmental concerns due to the wide use of plastic in food packaging have become one of the most significant challenges in the world. Consequently, the research in developing sustainable materials for food packaging has accelerated. Nanocellulose-based packaging is a biodegradable, renewable, and antimicrobial material with some competitive physicochemical characteristics when compared to plastic packaging. However, there has been insufficient research on a holistic discussion of the potentials and drawbacks of nanocellulose as well as its production, applications and disposal regarding sustainability. This study aims to evaluate the application of nanocellulose in food packaging. It gives an exhaustive overview of the essential aspects from the production to disposal of nanocellulose through a literature review. Then, a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is used to evaluate the potential and drawbacks of applying nanocellulose in food packaging. It has been observed that the physicochemical properties of nanocellulose materials have the potential to be used in food packaging with fewer negative impacts on the environment. Furthermore, it supports the top tiers of the waste hierarchy and a circular economy. However, some challenges need to be addressed to ensure the safe and effective use of nanocellulose in food packaging, including high expenses, a lack of guidelines, and potential hazards to people and the environment. To eliminate these uncertainties, more studies need to be performed on applying nanocellulose in food packaging.