In view of the suspected negative impact of synthetic fungicides to the human health, nutritional quality, and non-targeted organisms, the use of plant-based antifungal agents has gained considerable interest to the agri-food industries. The aim of this study was to explore the antifungal and aflatoxin B (AFB) inhibitory activity of chitosan (low molecular weight) encapsulated methyl salicylate. The nanoencapsulation of methyl salicylate (Ne-MS) has been characterized by SEM, FTIR, and XRD analysis. The encapsulation efficiency and loading capacity of Ne-MS ranged between 32-34% and 5-7% respectively. The minimum inhibitory concentration of Ne-MS (1.00 μL/mL) against the growth and aflatoxin B production by Aspergillus flavus was found to be lower than the free MS (1.50 μL/mL). Mode of action studies demonstrated that the Ne-MS cause a significant decrease in the ergosterol content, leakage of vital ions (Ca, Mg, and K), utilization of different carbon source by the A. flavus. Further, the docking result showed ver1 and omt A gene of AFB biosynthesis are the possible molecular site of action of methyl salicylate. The in situ study revealed that Ne-MS had no significant negative impact on the organoleptic properties of the food system (maize) which strengthen its potential as a biorational alternative of synthetic fungicides.