Agar is a biopolymer extracted from certain red algae. The continuous and transparent film made from agar gum is becoming a common and renewable alternative for plastic-based food packaging materials. However, plain agar film suffers from brittleness, high moisture permeability, and poor thermal stability. Considerable researches have been devoted to improving the properties of agar films to extend their applications. These include reinforcements by nanomaterials, blending with other biopolymers, and incorporating plasticizers, hydrophobic components, or antimicrobial agents into their structure. This article comprehensively reviews the functional properties and defects of edible films made from agar gum. Also, it describes various strategies and components used to make an agar film with desirable properties. Moreover, the applications of agar-based edible films with improved functionality for food packaging are discussed.