In this work a novel chitosan derivative, lauryl succinyl chitosan (LSC) was developed for the purpose of evaluating its applications towards oral peptide delivery system. Nano/microparticles were developed from this derivative by sodium tripolyphosphate (TPP) cross linking. Human insulin was used as the model protein drug and the release kinetics was studied at gastrointestinal pH. The presence of succinyl carboxyl groups had inhibitory effect on the release kinetics of insulin at pH 1.2 minimizing up to about 8.5+/-0.45% in two hours. Results showed that the presence of hydrophobic moieties controlled the release of the loaded insulin from the particles at intestinal pH. The particles were negatively charged with size ranging from 315 nm to 1.090 microm. The mucoadhesive capacity was established ex vivo using the jejunum of rat intestine. Confocal microscopy studies proved the tight junction permeability in Caco 2 cells and in vivo uptake of the FITC-insulin from loaded nanoparticles by the rat intestinal epithelium. The results demonstrated that the modified chitosan with both hydrophilic (succinyl) and hydrophobic (lauryl) moieties had improved the release characteristics, mucoadhesivity as well as the permeability of the insulin compared to the native chitosan particles. The LSC2 particles were capable of reducing blood glucose levels in diabetic rats for the duration of about 6 h. This indicated that this novel derivative could be a promising candidate for oral peptide delivery.