The success of biomaterial applications in medicine, particularly in tissue engineering, relies on achieving a balance between promoting tissue regeneration and controlling the immune response. Due to its natural origin, high biocompatibility, and versatility, chitosan has emerged as a promising biomaterial especially for immunomodulation purposes. Immunomodulation, refers to the deliberate alteration of the immune system's activity to achieve a desired therapeutic effect either by enhancing or suppressing the function of specific immune cells, signaling pathways, or cytokine production. This modulation opens up the unlimited possibilities for the use of biomaterials, especially about the use of natural polymers such as chitosan. Although numerous chitosan-based immunoregulatory strategies have been demonstrated over the past two decades, the lack of in-depth exploration hinders the full potential of strategies that include chitosan and its derivatives in biomedical applications. Thus, in this review, the possible immunomodulatory effects of chitosan, chitosan derivatives and their potential combined with various agents and therapies are investigated in detail. Moreover, this report includes agents for localized immune response control, chitosan-based strategies with complementary immunomodulatory properties to create synergistic effects that will influence the success of cell therapies for enhanced tissue acceptance and regeneration. Finally, the challenges and outlook of chitosan-based therapies as a powerful tool for improving immunomodulatory applications are discussed for paving the way for further studies.