Injectable thermo-activated hydrogels have shown great potential in biomedical applications including use in therapeutic delivery vehicles. In addition to their biocompatibility, the feasibility of these delivery systems is significantly contributed by their ability to gel at physiological conditions and to release entrapped molecules in a sustained manner. In this study, parameters affecting the gelling behavior and the release characteristics of a neutral hydrogel system based on chitosan and inorganic orthophosphate salt have been investigated. Monobasic and tribasic phosphate salts were not effective in inducing gelation of chitosan solution. However, in the presence of dibasic phosphate salt such as dipotassium hydrogen orthopohosphate (DHO), the acidic chitosan solution was neutralized and gelling at temperature and time regulated by varying chitosan and salt concentrations in the formulation. The release rate of the entrapped macromolecules depended on chitosan concentration, DHO concentration, structural conformation and molecular weight of entrapped agents. The relationship between the morphology of the hydrogel and the release profiles are discussed. Chitosan/DHO(Chi/DHO) hydrogels were found to be cytocompatible as evaluated in an in vitro study using a human cell line. These results indicate the potential of Chi/DHO hydrogels as delivery systems for different therapeutic agents with controlled release kinetics.