Water contamination by hazardous heavy metal ions and organic compounds causes environmental damage towards aquatic species and human health. Thus the evolution of highly selective, affordable, rapid and effective analytical tools for the removal and detection of toxic heavy metal ions and organic compounds in aqueous environments is a challenging objective. Electrochemical detection of metal ions and organic compounds is a very useful and effective method, where modified electrodes with metal nanocomposite particles are used. Materials with high porosity, low-charge transfer resistance and large electroactive area are desirable for electrode modification in order to act as an efficient electrochemical sensor. It has been established that natural polysaccharide-based graft copolymers with acrylic monomers can be efficiently used as ‘bio-template’ for preparing mono and bimetallic/metal oxide composite nanoparticles for sensing and catalytic applications. This is because of the fact that polysaccharide-based graft copolymers are eco-friendly in nature and have the potential to act as reducing and stabilizing agents. The bio-template-based metal/metal oxide nanocomposites are successfully used for the electrochemical sensing of some heavy metal ions, like Hg2+, Cd2+, Th4+, Zn2+, Pb2+, etc., and toxic phenolic compounds, and also show efficient catalytic application in azo dye degradation and p-nitrophenol reduction. The developed electrochemical sensors are selective, sensitive and effective for the detection of toxic heavy metal ions in real water samples. Here we summarize the various investigations carried out using metal/metal oxide nanocomposite particles (mono and bimetallic) in electrochemical sensing of toxic heavy metal ions and catalytic applications.