The incorporation of micelle self-assembly in hydrogels has been used to produce self-healing materials, materials with tunable mechanical properties, and hydrophilic or hydrophobic drug delivery systems. However, little is known about the connection among formulation – structure – properties (particularly transport) in these systems. This connection is explored in alkyl ethoxylate micelle-laden gellan gum hydrogels used as delivery system for the hydrophobic drug dexamethasone. Phase behavior maps and rheological characterization of the micelle-laden hydrogels indicate that their properties are largely dominated by the concentration and cloud point (CP) of the alkyl ethoxylate nonionic surfactant. The sol-gel temperature of the hybrid hydrogels was found to be close to the CP of the surfactant, and their storage modulus (G′) was found to increase with increasing surfactant concentration. A detailed analysis of the phase behavior maps, and evaluations of the mesh size of the hybrid hydrogels suggest a novel mechanism whereby micelles associate with gellan gum strands during high temperature hydration, hindering the double-helix assembly of the strands upon cooling. This increases the number of single strands and the density of physical cross-links, reducing the mesh size of the hydrogel. This mesh size reduction led to a decrease in the effective diffusion coefficient of micelles in the gel, and extended the release time of dexamethasone from 2 h in surfactant-free hydrogel to more than 2 days in the micelle-laden hydrogel.