The development of "green" alternatives to chemical pesticides could play a crucial role in integrated pest management (IPM). Their use is considered either as a substitution for or in addition to hazardous synthetic products. We analysed the influence of three concentrations of tansy (Tanacetum vulgare L.) essential oil (EO), previously characterised by GC-MS, on the survival and moulting of the 2nd instar and the nutritional indices of the 4th instar gypsy moth (Lymantria dispar L.) larvae. In a residual contact toxicity assessment, the exposure to tansy EO caused low mortality (< 10%) while larval development was significantly slowed down, i.e., the percentage of larvae that moulted into the 3rd instar was reduced. On the other hand, when tansy EO was incorporated into the diet (digestive toxicity assay), high mortality and a lack of moulting after 120 h of eating were recorded for the highest applied concentration of EO. During 48 h of feeding on EO-supplemented food at concentrations of 0.5 and 1% (v/v), the relative growth rate (RGR) of the 4th instar larvae significantly decreased, which can be explained by a significant reduction of the relative consumption rate (RCR) and significantly or marginally significantly lower efficiency of conversion of ingested food into insect biomass (ECI). Although the RCR was also reduced with the lowest applied EO concentration (0.1%), the ECI was not affected which meant the RGR was as high as it was for the control larvae. ECI changes, when two higher EO concentrations were applied, were due to a reduction in the efficiency of conversion of digested food into biomass (ECD), while approximate digestibility was unaffected by the presence of EO in the food. Our results on the significant negative effects of tansy EO on gypsy moth larval survival, development time, and nutritional physiology suggest that it could be considered in future designs for botanical insecticides for gypsy moth control.