A novel semi-interpenetrating (semi-IPN) graft copolymer of 2-hydroxyethyl methacrylate (HEMA) with chitosan (CS) has been prepared in the form of microspheres, using water-in-oil (W/O) emulsion technique. Microspheres were characterized by Fourier transform infrared spectroscopy (FTIR), differential scanning calorimetry (DSC, and X-ray diffractometry (X-RD) to confirm the crosslinking and polymorphism of indomethacin (IDM). The X-RD and DSC techniques indicated a molecular-level dispersion of IDM in the lPN matrix. Scanning electron micrographs (SEM) taken at the cross section of the micro-spheres have shown rough surfaces around the microspheres. The sustained release characteristics of the matrices for IDM, an anti-inflammatory drug, were investigated in pH 7.4 media. Particle size and size distribution of the microspheres were studied by laser light diffraction particle size analyzer. The drug was released in a sustained manner for up to 12 h.