In current research, chitosan was reacted with mono-chloroacetic acid under alkaline condition to prepare carboxymethyl chitosan (CMCTs). The degree of substitution (Ds) on prepared CMCTs was found to be 0.68. CMCTs was used as a potential carrier for pH specific delivery of nateglinide after crosslinked using glutaraldehyde in presence of nateglinide. The average molecular weight and degree of deacetylation (DD) of chitosan were found to be 3.5104 Da and 84.6% respectively. High yield (82%) and loading of drug (75%) were found in the developed hydrogel formulations. pH responsive swelling behavior of prepared hydrogels was checked using different pH values (1.2, 6.8 and 7.4). The study indicated very less swelling at pH 1.2 (for first 2 h) and quick swelling at pH 6.8 (for next 3 h) followed by linear swelling at pH 7.4 (for next 7 h) with slight increase. In vitro release profile of hydrogels showed biphasic release pattern dependent on swelling behavior. The release pattern was found to be non-fickian diffusion kinetics at higher pH. FTIR, 1H-NMR, DSC and p-XRD studies were carried out to confirm the formation of CMCTs, drug entrapment and its possible interaction in formulations. These studies revealed that no chemical change was found in nateglinide during preparation of hydrogel formulations. Scanning Electron Microscopy (SEM) was used to study the surface morphology of prepared hydrogels before and after dissolution which revealed pores formation after dissolution.