Antimicrobial and scar preventive wound dressings were developed by coating a blend of chitosan (CS), polyethylene glycol (PEG) and polyvinyl pyrolidone (PVP) on the cotton fabric and subsequent freeze drying. The miscibility of blend systems and functional group interaction were investigated by attenuated total reflectance-infra red spectroscopy. The scanning electron microscopy of the coated fabric revealed porous structure. The porosity of the material was 54–70% and the pore size was in the range of 75-120 μm depending on the blend composition. The air permeability diminished as the PVP content increased. The water vapour transmission rate was in the range of 2000–3500 g/m2day which may offer to be proper material for the wound dressing with moderate exudate absorption. Tetracycline hydrochloride was used as model drug within the hydrogel matrix. The cumulative release of drug was found to be ˜80% of the total loading after ˜48 h. The drug loaded dressings showed good antimicrobial nature against both gram positive and gram negative bacteria. In vivo wound healing and tissue compatibility studies were carried out over a period of 21 days on full-thickness skin wounds created on male Wistar rats. Fast healing was observed in drug loaded dressing treated wounds with minimum scarring, as compared to the other groups. These results suggest that drug loaded dressing could provide scar preventive wound healing.