The present study reports the formulation of Apium graveolens essential oil (AGEO) with its major components linalyl acetate (LA) and geranyl acetate (GA) (1:1:1) as a novel green preservative for protection of postharvest food commodities from fungal infestations, aflatoxin B1 (AFB1) secretion, free radical generation and lipid peroxidation. The essential oil based novel formulation displayed considerable inhibitory action against fourteen food borne molds responsible for deterioration of stored food commodities, in addition to the most toxigenic strain of Aspergillus flavus (AFLHPR14) isolated from fungal and aflatoxin contaminated rice seeds. The observed higher efficacy of designed formulation was due to the synergistic action of essential oil and its major components. Fungal plasma membrane was recorded as the possible target site of antifungal action of the formulation as revealed through reduction in membrane ergosterol content, increased intracellular propidium iodide (PI) fluorescence and enhanced leakage of cellular ions (sodium, potassium, calcium) and 260, 280 nm absorbing materials. Further, inhibition of methylglyoxal (an aflatoxin inducer) confirmed the aflatoxin inhibitory potential of novel formulation based on essential oil and its major components. High antioxidant potential as observed through DPPH and ABTS·+ radical scavenging assay, improved phenolic content, considerable inhibition of lipid peroxidation in stored rice seeds, in situ efficacy on AFB1 inhibition in food system under storage container system, acceptable sensorial characteristics and favorable safety profile during animal trials suggest the recommendation of the designed formulation for large scale application as green preservative by food and agriculture based industries against fungal and aflatoxin contamination of stored commodities.