With the aim of using poly(ethylene terephthalate) (PET) waste for the synthesis of a value added product, we prepared polyurethane (PU) from bishydrohxyethylene terephthalate (BHET), a byproduct obtained from the glycolysis of PET. Biodegradable, water-swelling PU was synthesized by the reaction of BHET, hexamethylene diisocyanate, and poly(ethylene glycol) (PEG). Both BHET and PU were characterized by Fourier transform infrared spectroscopy, and the formation of PU was further confirmed by NMR analysis. The swelling behavior of PU in water was examined in terms of the various molecular weights of PEG. Semi-interpenetrating network beads of PU and sodium alginate were prepared with calcium chloride (CaCl2) as a crosslinker to attain a pH sensitivity for successful oral protein/drug delivery. Bovine serum albumin (BSA) was used as a model protein. The pH-responsive swelling behavior and protein (BSA) release kinetics in different pH media corresponding to the gastrointestinal tract (pH 1.2 and 7.4) were investigated. The degree of swelling in the case of the PU–alginate beads at pH 1.2 was found to be at a minimum, whereas the degree of swelling was significantly elevated (1080%) at pH 7.4. This substantiated the pH sensitivity of the polymeric beads with a minimum loss of encapsulated protein in the stomach and the almost complete release of encapsulated protein in the intestine. This revealed good opportunities for oral protein/drug delivery with a polymer derived from waste PET. Moreover, the fungal biodegradation study confirmed its compatibility with the ecological system. © 2014 Wiley Periodicals, Inc. J. Appl. Polym. Sci. 2014, 131, 40650.