Hydrophobically modified chitosan containing beta-cyclodextrin (CD) units was synthesized by using tosylated beta-CD. The final product was characterized by Fourier transform infrared (FTIR) spectroscopy, elemental analysis and TGA, and rheometry. The polymer bearing beta-CD moieties was used to obtain crosslinked microparticles by spray-drying which could then be used in a controlled release system for drugs. FTIR confirmed the formation of an amide linkage between cyclodextrin and chitosan. As fluorescence spectroscopy demonstrated, hydrophobic microenvironments were formed by chitosan bearing cyclodextrin in solution at lower concentrations than for chitosan. Rheometry and FTIR showed the crosslinking of the new polymer using genipin, a molecule of natural origin. Microspheres (MS) obtained by spray-drying showed narrow size distribution when beta-CD was grafted onto chitosan and xi-potential of MS was slightly lower although it remained positive. In conclusion, beta-CD linked chitosan polymer can be considered as a very promising controlled drug delivery system for drugs. (C) 2011 Wiley Periodicals, Inc. J Appl Polym Sci 123: 3595-3604, 2012