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Nanotechnology is increasingly being used in areas of pesticide production and pest management. This study reports the isolation and virulence of a new <i>Metarhizium anisopliae</i> isolate SM036, along with the synthesis and characterization of <i>M. anisopliae</i>–chitosan nanoparticles followed by studies on the efficacy of nanoparticles against <i>Plutella xylostella</i>. The newly identified strain proved pathogenic to <i>P. xylostella</i> under laboratory conditions. The characterization of <i>M. anisopliae</i>–chitosan nanoparticles through different analytical techniques showed the successful synthesis of nanoparticles. SEM and HRTEM images confirmed the synthesis of spherical-shaped nanoparticles; X-ray diffractogram showed strong peaks between 2θ values of 16–30°; and atomic force microscopy (AFM) analysis revealed a particle size of 75.83 nm for <i>M. anisopliae</i>–chitosan nanoparticles, respectively. The bioassay studies demonstrated that different concentrations of <i>M. anisopliae</i>–chitosan nanoparticles were highly effective against second instar <i>P. xylostella</i> under laboratory and semi-field conditions. These findings suggest that <i>M. anisopliae</i>–chitosan nanoparticles can potentially be used in biorational <i>P. xylostella</i> management programs.