Seaweed-based biodegradable films were studied with incorporation of different concentrations of neem (Azadirachta indica) leaf extract. The films were fabricated via a hot casting method and were subjected to physical, mechanical, and morphological examinations to investigate the effect of the neem extract reinforcement in the edible film. There was moderate improvement in the tensile strength, contact angle values, and elongation at break values, while the water vapour permeability was reduced with the addition of neem leaves extract beyond 5 w/w %. Analysis of the morphology of the fabricated films confirmed that there was good dispersion of the neem leaves extract in the seaweed matrix films, which resulted in the enhanced mechanical strength of the fabricated films. Moreover, the fabricated composite films showed excellent antimicrobial activity towards both Gram-positive bacterium subclasses (coccus and bacillus), which is highly desirable for the packaging material in the current scenario. So far, this is the first report on neem leave based seaweed films with enhanced antimicrobial activity, which makes them suitable for sustainable packaging application. The experiments showed that the seaweed-based film incorporated with neem leaves extract has potential application as an active packaging material due to its enhanced mechanical properties and antimicrobial activity.