Pulp and paper industry is one of the major sector in every country of the globe contributing not only to Gross Domestic Product but surprisingly to environmental pollution and health hazards also. Paper and paperboard based material is the one of the earliest and largest used packaging form for food products like milk and milk based products, beverages, dry powders, confectionary, bakery products etc. owing to its eco-friendly hallmark. Various toxic chemicals like printing inks, phthalates, surfactants, bleaching agents, hydrocarbons etc. are incorporated in the paper during its development process which leaches into the food chain during paper production, food consumption and recycling through water discharges. Recycling is considered the best option for replenishing the loss to environment but paper can be recycled maximum six to seven times and paper industry waste is very diverse in nature and composition. Various paper disposal methods like incineration, landfilling, pyrolysis and composting are available but their process optimization becomes a barrier. This review article aims at discussing in detail the use of paper and paper based packaging materials for food applications and painting a wide picture of various health and environmental issues related to the usage of paper and paper based packaging material in food industry. A brief comparison of the environmental aspects of paper production, recycling and its disposal options (incineration and land filling) had also been discussed.