Chitosan (deacetylation=75-85%) and sodium tripolyphosphate (TPP) solutions were observed to undergo spontaneous coacervation transition or nanoparticle formation depending on the chitosan concentration and the volumetric mixing ratio [chitosan/TPP]. Three distinct conditions have been identified: (i) [chitosan]<or=0.5mg/ml, 0.5<or=[chitosan/TPP]<or=2 and pH<5.5, yields spontaneous coacervation, (ii) 0.5<or=[chitosan]<or=2.5mg/ml, [chitosan/TPP]>or=2 and 3.5<pH<5.5, produces chitosan nanoparticles and (iii) 0.5<or=[chitosan]<or=3mg/ml, 3<or=[chitosan/TPP]<or=6 and 5<pH<7.5, favors induced coacervation. Sizing done by TEM and dynamic light scattering studies revealed that chitosan nanoparticles had typical diameter in the range approximately 150-350 nm depending on polymer concentration and chitosan/TPP mixing ratio, which reduced by approximately 40% when polyethylene glycol (PEG) was added to these solutions. The long-time light scattering probing of the solutions revealed that residual interactions continuously produced soluble intermolecular complexes over extended period of time, a process that enabled the generation of coacervate droplets seamlessly. The coacervates (formed spontaneously or induced), and chitosan and chitosan-PEG nanoparticles, were used for encapsulating hydrophobic protein synthesis inhibitor model drug cycloheximide. The comparative in vitro release profiles in phosphate buffer and simulated intestinal fluid was monitored at 37 degrees C.