Bioencapsulation has gained substantial attention in a wide spectrum of applications including bioremediation, sensing, and catalysis over the past few decades. However, such biohybrid systems suffer with many drawbacks in terms of low viability, low diffusion, and loss of biological activity. Therefore, it is more important to preserve the pristine characteristics and activity of biological elements against various environmental factors. In recent years, electrospinning has been acknowledged as a feasible technique for fabricating biohybrid fibrous composites by incorporating various biological materials using several approaches including direct encapsulation, core-shell encapsulation, and surface immobilization. In this review, the recent developments on the different methodologies in encapsulation and immobilization of microbial cells (i.e., bacteria, algae, viruses, and yeast) in electrospun nanofibers and their potential applications in bioremediation, food, agriculture, biocatalysis, regenerative medicine, etc. are briefly summarized. Further, ongoing challenges and future outlook in the electrospun nanofibrous biohybrid composites fabrication are concluded.