In recent years, bacterial cellulose (BC), a crystalline and nanoscale fibrillar polymer, has garnered significant interest due to its superior physical, chemical, and mechanical properties compared to plant cellulose. Inherent features of BC, which include high biodegradability, mechanical strength, and biocompatibility, make it a suitable material for use in a wide variety of applications, particularly in the domains of biomedicine and environmental science. However, realizing its full potential requires targeted chemical or physical modifications. Recent developments have focused on in-situ and ex-situ BC modification for various applications. Incorporating functional compounds into cellulose during BC synthesis enhances its strength and functional properties. Additionally, the material properties of BC, such as water content, thermal stability, and antibacterial capabilities, can be enhanced through post-synthesis modifications, including chemical acetylation, phosphorylation, and integration with other biopolymers. Currently, the applicability of BC is being improved using new modification techniques, which involve genetically engineered strains to enhance polymer characteristics and market potential. The review highlights recent advancements in BC research and novel modification strategies that enhance its applications in advanced biomedical engineering and sustainable packaging.