Chitosan, a natural based-polymer obtained by alkaline deacetylation of chitin, is nontoxic, biocompatible, and biodegradable. These properties make chitosan a good candidate for the development of conventional and novel drug delivery systems. Chitosan has been found to be used as a support material for gene delivery, cell culture, and tissue engineering. However, practical use of chitosan has been mainly confined to the unmodified forms. For a breakthrough in utilization, especially in the field of controlled drug delivery, graft copolymerization onto chitosan will be a key point, which will introduce desired properties and enlarge the field of the potential applications of chitosan by choosing various types of side chains. Chemical modification of chitosan is useful for the association of bioactive molecules to polymer and controlling the drug release profile. This paper reviews the various methods of preparation of chitosan derivatives intended for controlled drug delivery. From the studies reviewed it is concluded that chitosan derivatives are promising materials for controlled drug and nonviral gene delivery.