Composite hydrogels can be used as a scaffolding material for chondrogenesis, which requires a biomimetic environment to maintain chondrocyte morphology and phenotype. In this study, gelatin molecules were loaded into a hydrogel polymerized from a chitosan derivative (CML) to form a semi-interpenetrating polymer network. While the porous structure of the hydrogels in the dry state was not dependent on the gelatin content, the collapse extent and pore size decreased as the gelatin content increased. The gelatin loading also reduced the swelling ratio of the CML hydrogel and enhanced the hydrogel strength at 20°C due to gelation of the gelatin. The release behavior of the gelatin from the CML hydrogel could be controlled by many factors, such as the amount of gelatin, temperature, and solution pH. The weight loss of the composite hydrogel was expedited after gelatin loading and showed a positive relationship with the gelatin content. The results of in vitro cell culture in the hydrogels revealed that gelatin loading improved cell viability and promoted proliferation and glycosaminoglycans secretion of chondrocytes. This new scaffold production technology for chondrocyte encapsulation provides a further step towards CML applications in tissue engineering and other biomedical areas.