There is a growing interest for aromatic and biological properties of essential oils as alternatives to synthetic chemicals and drugs. However, essential oils and their components are poorly soluble in aqueous systems and are highly sensitive to degradation and evaporation. These drawbacks can be overcome by encapsulation into cyclodextrins, which are non-toxic cyclic oligosaccharides obtained from the enzymatic degradation of starch. Cyclodextrins inclusion complexes offer solutions to many limitations of the use of essential oils in the food, pharmaceutical and cosmetic industries. This article reviews essential oils encapsulation in cyclodextrins. The strength of binding between cyclodextrins and essential oils components covers a wide range of formation constants with values ranging from 13 to 166,338 M−1. The encapsulation in cyclodextrins can increase the aqueous solubility of essential oils up to 16-fold and reduce their photodegradation rates up to 44-fold, while ensuring a gradual release. We also discuss the effect of encapsulation on biological activities, such as antimicrobial and antioxidant properties of essential oils. Finally, we present novel cyclodextrin-based approaches in the sectors of textiles and nanofibres.