The major antibacterial components in wood vinegar was determined and novel microencapsulation of wood vinegar extract was successfully prepared to protect it from environmental stress. Three major fractions, including Fr.1 (mainly phenol and 2-methoxyphenol), Fr.2 (largely 2,6-dimethoxyphenol), and Fr.3 (mostly 3-methyl-1,2-cyclopentanedione), were extracted from wood vinegar by chromatography. Antibacterial activity was evaluated by serial dilution against eight pathogens, including an antibiotic-resistant strain. The minimum inhibition concentration were ranging in 1.56–12.50 μL/mL and 0.78–6.25 μL/mL, respectively, for Fr.1 and Fr.2, which shows that wood vinegar extract exhibits a broad antibacterial spectrum. To improve the stability of wood vinegar extract and make it easier to store, for the first time wood vinegar extract was encapsulated, alginate and chitosan were used as wall materials for the encapsulation using an ionic gelation method. The agar diffusion results showed that the microcapsules still exhibited excellent antibacterial action. The stability of the phenols in microcapsules was improved effectively and in vitro simulation digestion showed a more pronounced release in intestine. The application feasibility of wood vinegar extract was evident and real potential to produce natural antibacterial agents, with real possibility to be used in food and pharmaceutical industries.