Chitosanase has attracted great attention due to its potential applications in medicine, agriculture, and nutraceuticals. In this study, P. mucilaginosus TKU032, a bacterial strain isolated from Taiwanese soil, exhibited the highest chitosanase activity (0.53 U/mL) on medium containing shrimp heads as the sole carbon and nitrogen (C/N) source. Using sodium dodecyl sulfate-polyacrylamide gel electrophoresis (SDS-PAGE) analysis, a chitosanase isolated from P. mucilaginosus TKU032 cultured on shrimp head medium was determined at approximately 59 kDa. The characterized chitosanase showed interesting properties with optimal temperature and thermal stability up to 70 °C. Three chitosan oligosaccharide (COS) fractions were isolated from hydrolyzed colloidal chitosan that was catalyzed by TKU032 chitosanase. Of these, fraction I showed the highest α-glucosidase inhibitor (aGI) activity (65.86% at 20 mg/mL); its inhibitory mechanism followed the mixed noncompetitive inhibition model. Fractions II and III exhibited strong 2,2-diphenyl1-picrylhydrazyl (DPPH) radical scavenging activity (79.00% at 12 mg/mL and 73.29% at 16 mg/mL, respectively). In summary, the COS fractions obtained by hydrolyzing colloidal chitosan with TKU032 chitosanase may have potential use in medical or nutraceutical fields due to their aGI and antioxidant activities.