The study introduces a novel method for fabricating crosslinked chitosan/polypyrrole (PPy) composite nanofibers with covalently anchored PPy. Crosslinking is achieved already during electrospinning by using dialdehyde cellulose (DAC) as a dual-functioning reagent able to simultaneously crosslink chitosan nanofibers and covalently tether PPy nanoparticles by a newly discovered aldol condensation reaction. The presented method eliminates the need for postprocessing steps. It reduces the environmental impact by avoiding toxic organic chemicals while preventing PPy leaching and improving prepared composite nanofibers' mechanical and biological properties. A direct comparison to neat chitosan nanofibres was performed to demonstrate the superiority of prepared composites. The resulting crosslinked CHIT_DAC_PPy composite nanofibers have increased tensile strength, improved stability at low pH, conductivity up to 11 mS/cm, and higher swelling compared to neat CHIT nanofibers. They also possess significantly enhanced antibacterial activity against gram-positive S. aureus, higher antioxidant activity, increased immunomodulatory effects, and significantly higher acceleration of wound healing in vitro. CHIT_DAC_PPy nanofibrous composite thus shows significant potential for fabricating advanced wound dressings.