Of late, the most bountiful natural biopolymer chitin and chitosan have become cynosure of all party because of an unusual combination of biological activities plus mechanical and physical properties. However applications of chitin are limited due to its inherent insoluble and intractable nature. Chitosan, alkaline hydrolytic derivative of chitin has better solubility profile, less crystallinity and is amenable to chemical modifications due to presence of functional groups as hydroxyl, acetamido, and amine. The chemical modification of chitosan is of interest because the modification would not change the fundamental skeleton of chitosan, would keep the original physicochemical and biochemical properties and finally would bring new or improved properties. In view of rapidly growing interest in chitosan its chemical aspects and chemical modification studies is reviewed. The several chemical modifications such as oligomerization, alkylation, acylation, quternization, hydroxyalkylation, carboxyalkylation, thiolation, sulfation, phosphorylation, enzymatic modifications and graft copolymerization along with many assorted modifications have been carried out. The chemical modification affords a wide range of derivatives with modified properties for specific end use applications in diversified areas mainly of pharmaceutical, biomedical and biotechnological fields. Assorted modifications including chitosan hybrids with sugars, cyclodextrin, dendrimers, and crown ethers have also emerged as interesting multifunctional macromolecules. The versatility in possible modifications and applications of chitosan derivatives presents a great challenge to scientific community and to industry. The successful acceptance of this challenge will change the role of chitosan from being a molecule in waiting to a lead player. (C) 2008 Elsevier Ltd. All rights reserved.