Cellulose, the most widespread biopolymer, is known to occur in a wide variety of living species from the worlds of plants and microbial sources like bacteria. Bacterial cellulose produced by Gluconacetobacter xylinus in the form of long fibers can be acid hydrolyzed under controlled conditions to obtain nanocrystals. Such nanocrystals constitute a generic class of ‘green’ nanomaterial and have attained great importance in the field of polymer nanocomposites attributed to their superior properties. However, conventional sulfuric acid hydrolysis route provides cellulose nanocrystals with inferior mechanical and thermal properties. In this study, a hydrochloric acid (HCl) assisted top down approach has been adopted to synthesize bacterial cellulose nanocrystals, which is found to retain some of the natural properties of native cellulose even in nano-dimensions. The morphological parameters were analyzed using atomic force microscopy which confirmed the formation of nanocrystals. Using these novel nanocrystals, poly vinyl alcohol (PVA) nanocomposite films were prepared and characterized for elucidating their properties. The addition of nanocrystals has significantly improved the thermal stability and mechanical properties of PVA nanocomposites. Results of this study demonstrated that nanocrystals obtained by HCl have several advantages in the fabrication of high performance polymer nanocomposite films for food packaging applications.