Healthcare-associated infections (HAIs) are infections associated with hospital stay that can lead to increased morbidity, mortality, and healthcare costs. Biosynthesized zinc oxide (ZnO) nanoparticle-functionalized fabrics have emerged as a promising solution to combat these infections. This review examines current research on the biosynthess of ZnO nanoparticles and their incorporation into various fabric materials for antibacterial and biocompatible medical applications. The principles and advantages of bio-mediated synthesis using microorganisms, algae, and plant extracts are discussed, along with the factors affecting the synthesis process and optimization of nanoparticle properties. The review explores methods of incorporating biosynthesized ZnO nanoparticles into natural and synthetic fabrics, the antibacterial mechanisms of ZnO nanoparticles, and their efficacy against Gram-positive and Gram-negative bacteria. The biocompatibility and cytotoxicity of these nanoparticle-functionalized fabrics were evaluated, emphasizing the importance of in vitro and in vivo studies to assess their safety and potential impact on human health and the environment. It then explored the use of ZnO nanoparticle-functionalized fabrics in medical applications such as wound dressings, antimicrobial gowns, protective textiles, and bedding, highlighting their potential to reduce healthcare-associated infections. It also discusses the key challenges, such as scalability, cost-effectiveness, durability, wash fastness, and regulatory aspects, as well as future perspectives, including emerging research directions and advanced approaches that highlight the ongoing development and potential impact of biosynthesized ZnO nanoparticle-functionalized fabrics in medical settings.