Active biodegradable films from chitosan containing 10% to 30% w/w of citronella essential oil (CEO) and cedarwood oil (CWO) were developed by casting and solvent-evaporation method, and their physical, mechanical and thermal properties were investigated. Possible interactions between the chitosan chains and the essential oils were confirmed using Fourier-transform infrared spectroscopy (FTIR). Various amounts of CEO or CWO had significant effects on the films’ mechanical properties, with the exception of 10% of CEO, which did not significantly affect the tensile strength of the films. The incorporation of the two tested oils provoked a remarkable reduction in the water-vapor permeability properties, with a decrease of about 63% when 30% CEO was added in chitosan films. Thermogravimetric analysis showed that degradation temperatures of the films containing CEO and CWO improved only slightly in comparison to control films without essential oils. FTIR spectra analysis provided some insights on the possible interactions between chitosan and the two essential oils used. This study suggests that active films can be developed by including CEO and CWO in a chitosan matrix. Such films can provide new formulation options for packaging industries in developing active packaging with potential food-technology applications.