In this modern era, a world without synthetic polymers is incredible. Polyurethanes (PUs) one of these, are versatile materials and can be processed in a number of ways to obtain a wide range of valuable products e.g. adhesives, coatings, foams, and fibers. Utilization of renewable materials for the manufacturing of the polymers is desirable and appreciated from sustainability, as well as ecological considerations. In the past few decades, polymer/clay bio-nanocomposites have been extensively investigated due to their improved properties, including biodegradability, thermal stability, flame resistance and gas barrier properties, when compared to neat polymer. To improve the properties of an individual polymer system it is common to blend them with other natural or synthetic polymers. The carbohydrates based cross-linker (starch, cellulose, chitosan, and carrageenan) employed in the synthesis of PUs helped to improve the mechanical and thermal properties of the polymer. The cross-linking between carbohydrates and polyurethanes gives amorphous polymer micro-domains which transfer the stress to cross-link carbohydrates which increase the mechanical strength. Because of unique biological behavior of chitosan (CS), including nontoxicity and biodegradability, various applications of CS have been found either alone or blended with other natural polymers (starch, dextrin, carboxymethyl cellulose, alginates, gelatin) in the agriculture, pharmaceutical, water treatment, food, cosmetics, and textile industries. The present research work has been designed to synthesize chitosan based polyurethane bio-nanocomposites (PUBNCs) by step-growth polymerization technique using hydroxyl-terminated polybutadiene (HTPB) and polycaprolactone diol (PCL) as a flexible spacer (polyol). Different samples of PUBNCs were prepared by varying the blends of 1,4-butanediol and chitosan as chain extenders. Effect of diisocyanate structure on the properties of PUs has been studied using various diisocyanates like isophorone diisocyanate (IPDI), 4,4''-methylene bis(cyclohexyl isocyanate) (H12MDI), hexamethylene diisocyanate (HMDI) and 2,4-toluene diisocyanate (TDI). Blends of chitosan along with sodium carboxymethyl cellulose (CMC) also incorporated into the polyurethane (PU) to prepare cost-effective polyurethane. Various properties of chitosan and blends incorporated PUs like surface, structural, mechanical, thermal, biocompatibility, and antimicrobial properties were improved with the addition of chitosan into the PU. Chitosan has been found an extraordinary for the preparation of PU and chitosan made PU a desirable material for the biomedical as well as industrial applications.