A new thermosensitive hydrogel was designed and prepared by simply mixing N-[(2-hydroxy-3-trimethylammonium) propyl] chitosan chloride (HTCC) and poly(ethylene glycol) (PEG) with a small amount of alpha-beta-glycerophosphate (alpha-beta-GP). The optimum preparative condition was investigated, and the obtained formulation underwent thermal transition from solution below or at room temperature to non-flowing hydrogel around 37 degrees C in several minutes. As a new formulation, its potential use as nasal drug delivery system was studied. It can be dropped or sprayed easily into nasal cavity and spread on the nasal mucosa in solution state. After being administered into nasal cavity, the solution transformed into viscous hydrogel at body temperature, which decreased nasal mucociliary clearance rate and released drug slowly. Morever, quaternized chitosan as absorption enhancer has been studied extensively in several reports and proved its non-toxicity, mucoadhesivity and the capacity to open the tight junctions between epithelial cells. Therefore, in this study insulin as a model drug was entrapped in this formulation and its release behavior in vitro was also investigated. The enhancement of absorption of fluorescein isothiocyanate (FITC)-labeled insulin in rat nasal cavity by this formulation was proved by confocal laser scanning microscopy (CLSM). The cytoxicity and the change of the blood glucose concentration after nasal administration of this hydrogel were also investigated. The hydrogel formulation decreased the blood glucose concentration apparently (40-50% of initial blood glucose concentration) for at least 4-5h after administration, and no apparent cytoxicity was found after application. These results showed that HTCC-PEG-GP formulation can be used as nasal drug delivery system to improve the absorption of hydrophilic macromolecular drugs.