ABSTRACT Utilization of by‐products from food and vegetable processing has gained immense importance in recent times since the addition of their extracts into biopolymers yields active films. The added advantages include abundance, cost‐effectiveness, functionality, and their environmentally friendly nature. In the present work, active food packaging materials were developed by incorporating onion peel extract (OPE) in starch‐polyvinyl alcohol‐montmorillonite (starch‐PVA‐MMT) biopolymer films. The physicochemical, mechanical, thermal, surface, and antioxidant properties of the films were analyzed. The physical integrity of the starch‐PVA‐MMT films was conserved even after the addition of OPE. Cooperative interactions between the polymer matrix and OPE were revealed via FTIR and XRD analysis. OPE also conferred UV barrier attributes to the transparent starch‐PVA‐MMT films. After incorporation of OPE, while the elongation at break of the films increased by ∼16.85%, tensile strength reduced by 12.43%. FE‐SEM studies revealed significant alteration in the surface of the films; the roughness of the film increased notably and confirmed the interactions between the OPE and the polymer matrix. This also led to an increase in the contact angle of the films. Further, OPE induced significant antioxidant properties in the films, amounting to ∼97% in comparison to 0% for the control film. Additionally, OPE showed a profound effect on the biodegradability of the starch‐PVA‐MMT films. The films were used for packing coriander. Results revealed increased shelf life of coriander in terms of retaining moisture and color in comparison to unpacked material and commercial film of LDPE. Practical Application : Antioxidant films of starch blends incorporated with onion peel extract (OPE) have been investigated as a potential innovation for sustainable packaging in the food industry. These films could be effectively used for reducing oxidative changes and microbial spoilage of perishable items such as coriander leaves. Films with two different concentrations of OPE (1.5 and 3 mL), i.e., 1.5 OPE and 3.0 OPE, were chosen for packaging as their overall properties were found to be superior. After biodegradation, the highest weight loss was observed for 4.5 OPE films, an increase of 33.33% in comparison to the control film. Moreover, their eco‐friendly and degradable nature aligns with the rising consumer demand for sustainable packaging.