Biodegradable chitin is the second-most abundant natural polysaccharide, widely existing in the exoskeletons of crabs, shrimps, insects, and the cell walls of fungi. Chitosan and chitooligosaccharide (COS, also named chitosan oligosaccharide) are the two most important deacetylated derivatives of chitin. Compared with chitin, chitosan and COS not only have more satisfactory physicochemical properties but also exhibit additional biological activities, which cause them to be widely applied in the fields of food, medicine, and agriculture. Additionally, due to their significant ability to improve gut microbiota, chitosan and COS are deemed prospective prebiotics. Here, we introduced the production, physicochemical properties, applications, and pharmacokinetic characteristics of chitosan and COS. Furthermore, we summarized the latest research on their antioxidant, anti-inflammatory, and antimicrobial activities. Research progress on the prebiotic functions of chitosan and COS is particularly reviewed. We creatively analyzed and discussed the mechanisms and correlations underlying these activities of chitosan and COS and their physicochemical properties. Our work enriched people's understanding of these non-plant-derived prebiotics. Based on this review, the future directions of research on chitosan and COS are explored. Collectively, optimizing the production technology of chitin derivatives and enriching understanding of their biological functions will shed more light on their capability to improve human health.