Pharmaceutical technologists have been working extensively on various mucoadhesive polymeric systems to create an intimate and prolonged contact at the site of administration. Chitosan is one of the most promising polymers because of its non-toxic, polycationic biocompatible, biodegradable nature, and particularly due to its mucoadhesive and permeation enhancing properties. Due to its potential importance in controlled drug delivery applications, pharmaceutical scientists have exploited this mucoadhesive polymer. However, chitosan suffers from limited solubility at physiological pH and causes presystemic metabolism of drugs in intestinal and gastric fluids in the presence of proteolytic enzymes. These inherent drawbacks of chitosan have been overcome by forming derivatives such as carboxylated, various conjugates, thiolated, and acylated chitosan, thus providing a platform for sustained release formulations at a controlled rate, prolonged residence time, improved patient compliance by reducing dosing frequency, enhanced bioavailability and a significant improvement in therapeutic efficacy. We have explored the potential benefits of these improved chitosan derivatives in modern drug delivery.