Cinnamaldehyde (CA) is marginally soluble in water, making it challenging to evenly disperse it in foods, and resulting in lowered anti-A. flavus efficacy. In the present study, nano-dispersed CA (nano-CA) was prepared to increase its aqueous solubility. Free and nano-dispersed CA were compared in terms of their inhibitory activity against fungal growth and aflatoxin production of A. flavus both in Sabouraud Dextrose (SD) culture and in peanut butter. Our results indicated that free CA inhibited the mycelia growth and aflatoxin production of A. flavus with a minimal inhibitory concentration (MIC) value of 1.0 mM, but promoted the aflatoxin production at some concentrations lower than the MIC. Nano-CA had a lower MIC value of 0.8 mM against A. flavus, and also showed improved activity against aflatoxin production without the promotion at lower dose. The solidity of peanut butter had an adverse impact on the antifungal activity of free CA, whereas nano-dispersed CA showed more than 2-fold improved activity against the growth of A. flavus. Free CA still promoted AFB1 production at the concentration of 0.25 mM, whereas nano-CA showed more efficient inhibition of AFB1 production in the butter.