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This study presents an innovative approach for developing biocomposite food packaging films by blending polylactic acid (PLA) and polycaprolactone (PCL) with orange (Citrus reticulata) peel essential oil (OEO) as a bio-plasticizer and lignin as a biocompatibilizer. The utilization of OEO, derived through steam distillation, enhances the antimicrobial, antioxidant, and flexible properties of the films, while lignin from grape stalks improves polymer compatibility and mechanical performance. The biodegradable PCL and PLA granules were sourced from Metalon Marketing, India, and were combined with chloroform, lignin, and varying concentrations of OEO to form the biocomposite films. The prepared films underwent a comprehensive set of tests, including opacity, thermal stability (TGA), barrier properties, hydrophobicity (contact angle), mechanical testing, and antimicrobial effectiveness. Among the tested samples, specimen M5, containing 15 wt.% OEO, exhibited the most favorable results across all evaluations. M5 achieved the highest opacity (28.7%), making it suitable for light-sensitive packaging applications. It showed the highest decomposition temperature (305 °C) and TG% (91%) in TGA, indicating enhanced thermal stability due to better interaction between OEO and the polymer matrix. M5 also had the lowest water vapor transmission rate (WVTR) of 110 g/m2/day, demonstrating superior moisture barrier properties, which can be attributed to the hydrophobic nature of OEO creating a more compact structure. The contact angle of M5 was the highest (79°), confirming improved hydrophobicity, while its mechanical properties showed optimal flexibility with an elongation at break of 43.21% and a moderate Young's modulus of 0.97 GPa, balancing flexibility and stiffness. The antimicrobial test results for M5 showed the largest inhibition zones of 20.5 mm against Staphylococcus aureus and 19.7 mm against Escherichia coli, highlighting its superior antimicrobial activity due to higher release of bioactive compounds from OEO. Scanning electron microscopy (SEM) analysis further supports these findings by revealing a more homogeneous and refined structure for M5, with fewer visible voids compared to other samples. The fine dispersion of OEO within the PLA/PCL matrix in M5 resulted in a well-integrated and compatible polymer network, reducing microstructural flaws and enhancing overall material properties. This study not only meets the demand for sustainable and functional food packaging but also promotes the creative repurposing of agricultural byproducts, presenting a significant advancement in environmentally friendly packaging solutions. [ABSTRACT FROM AUTHOR]