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This paper reports on the cross-linking of dried (<5% moisture) paracetamol alginate granules with calcium chloride solutions. The effect of calcium concentration, temperature of the treatment solution, stirring speed and time used during cross-linking of granules on water uptake by the granules during cross-linking and physical properties of the cross-linked and dried granules were studied. A full factorial study of these factors each at two levels was used (CaCl2·2H2O: 20, 100 mg/ml; temperature: 25, 45° C; stirrer speed: 25, 240 rpm; time: 1.5 and 5.5 min) to treat dried stock granules (size: 0.8–1.0 mm) containing the model drug paracetamol and sodium alginate powder (1:1) which were prepared using conventional aqueous granulation under low shear. In addition to SEM and photomicrography, the physical properties studied were water uptake during cross-linking, yield, aggregation behaviour, moisture content, drug content, early stage drug release [over 10 s (R10) and the next 50 s (R50)] and calcium and sodium content of the unwashed cross-linked granules. Dry granules were successfully cross-linked. The treatment factors significantly affected most of the response variables. The variables most affected were water uptake (78–254%), drug entrapment (58–86%), early release (R10: 1.2–6.4% and R50: 3.0–12.2%), granule aggregation (0–70%), calcium (6.02–12.4%) and sodium content (1.2–6.44%). SEM photographs suggest that low calcium treated granules were less porous in nature compared to high calcium treated granules. Low shear drug alginate granules can be cross-linked in dried state. The properties of the cross-linked granules can be modified by altering the treatment process.