Biochar has the potential as a unique and sustainable solution that can be used as an active component in developing sustainable food processing and packaging materials to address emerging ecological challenges. Biochar production using biowaste is noteworthy regarding resource efficiency improvement, waste management, and environmental burden reduction for conversion to a circular economy. Biochar is produced through the thermochemical conversion of organic waste feedstock (biomass) and has several unique properties, such as carbon content, porous nature, and large specific surface area. Biochar is a cost-effective and efficient biomaterial with numerous biological properties such as biocompatibility, non-cytotoxicity, and environmental sustainability. This review highlights the prospects and in-depth summary of biochar as a safe and natural material that could potentially constitute a biosensing probe for tracking hazards in packaged products and highlights its prospects for developing active food packaging. This review also describes biochar manufacturing methods, biochar’s mechanism of action, analytical methods, and safety parameters. Finally, the benefits, challenges, and perspectives of applying biochar in food safety and packaging are presented.