In this work, a hydrophobically modified (HM) chitosan derivative was prepared by covalent linkage of C12 groups to the chitosan backbone. HM-chitosan microparticles were prepared according to an emulsification-solvent evaporation method and naltrexone (NTX) was used as a model drug. For comparison, unmodified chitosan and poly lactic-co-glycolic acid (PLGA) microparticles were also tested as carriers for NTX. HM-chitosan formed viscous semi-dilute solutions, suggesting a high level of chain entanglements and hydrophobic associations. HM-chitosan microparticles generally showed higher production yield and encapsulation efficiency, as compared with chitosan and PLGA. The burst release shown by chitosan microparticles was significantly reduced when using the HM-chitosan derivative. An enhanced control of drug release was observed over at least 50 days. PLGA particles demonstrated inferior controlled release properties as compared to HM-chitosan subsequent to the initial release stage. These results revealed the potential of hydrophobic modification of chitosan as a means to improve the stability and sustained delivery properties of the polymer. © 2013 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 40055.