Abstract: Localized drug delivery systems are effective means to administer therapeutic concentrations and controlled release of drugs. A delivery system consisting of non-ionic surfactant vesicles (niosomes) packaged within a biodegradable, temperature and pH sensitive hydrogel network was developed. Drug behaviors were modeled using a fluorescent dye with similar physical properties as therapeutic drugs for cancer. The niosomes were embedded into a biodegradable hydrogel providing a stable niosome environment. A cross linked chitosan was used as the hydrogel, which is a liquid at room temperature, and gels inside the body. Depending on the conditions to which individual niosomes are exposed, the release rate can be controlled to last from 24 hours to more than 3 months.