Chitosan nanoparticles (CNPs) were synthesized in this study to enhance the limited bioactivity and stability of <i>Cordyceps militaris</i> grown on germinated <i>Rhynchosia nulubilis</i> (GRC) and effectively deliver it to target tissues. Under optimized conditions, stable encapsulation of GRC was achieved by setting the chitosan (CHI)-to-tripolyphosphate (TPP) ratio to 4:1 and adjusting the pH of TPP to 2, resulting in a zeta potential of +22.77 mV, which indicated excellent stability. As the concentration of GRC increased, the encapsulation efficiency decreased, whereas the loading efficiency increased. Fourier-transform infrared (FT-IR) spectroscopy revealed shifts in the amide I and II bands of CHI from 1659 and 1578 to 1639 cm⁻<sup>1</sup>, indicating hydrogen bonding and successful encapsulation of GRC encapsulated with CNPs (GCN). X-ray diffraction (XRD) examination revealed the transition of the nanoparticles from a crystalline to an amorphous state, further confirming successful encapsulation. In vivo experiments demonstrated that GCN treatment significantly reduced lung injury scores in fine particulate matter (PM<sub>2.5</sub>)-exposed mice (<i>p</i> < 0.05) and alleviated lung epithelial barrier damage by restoring the decreased expression of occludin protein (<i>p</i> < 0.05). In addition, GCN decreased the PM<sub>2.5</sub>-induced upregulation of <i>MMP-9</i> and <i>COL1A1</i> mRNA expression levels, preventing extracellular matrix (ECM) degradation and collagen accumulation (<i>p</i> < 0.05). GCN exhibited antioxidant effects by reducing the mRNA expression of nitric oxide synthase (<i>iNOS</i>) and enhancing both the protein and mRNA expression of superoxide dismutase (<i>SOD-1</i>) caused by PM<sub>2.5</sub>, thereby alleviating oxidative stress (<i>p</i> < 0.05). In A549 cells, GCN significantly reduced PM<sub>2.5</sub>-induced reactive oxygen species (ROS) production compared with GRC (<i>p</i> < 0.05), with enhanced intracellular uptake confirmed using fluorescence microscopy (<i>p</i> < 0.05). In conclusion, GCN effectively alleviated PM<sub>2.5</sub>-induced lung damage by attenuating oxidative stress, suppressing apoptosis, and preserving the lung epithelial barrier integrity. These results emphasize its potential as a therapeutic candidate for preventing and treating the lung diseases associated with PM<sub>2.5</sub> exposure.