To develop materials with improved controllability and specificity, we have investigated composite hydrogels with temperature-sensitive properties using photo cross-linking. Specifically, our novel composite materials are composed of nanoparticles made of poly(N-isopropylacrylamide) (PNIPAAm), temperature-sensitive hydrogels, and a photo cross-linker, poly(ethylene glycol) diacrylate (PEGDA). PNIPAAm particles were synthesized by emulsion polymerization and by varying concentration of four main factors: monomers (N-isopropylacrylamide), cross-linkers (N, N′-methylenebisacrylamide), surfactants (sodium dodecyl sulfate, SDS), and initiators (potassium persulfate). We found that the surfactant, SDS, was the most important factor affecting the particle size using the factorial design analysis. Additionally, both nano- and micro-PNIPAAm particles had excellent loading efficiency (>80% of the incubated bovine serum albumin (BSA)), and their release kinetics expressed an initial burst effect followed by a sustained release over time. Furthermore, BSA-loaded PNIPAAm nanoparticles were used to form three-dimensional gel networks by means of a photocuring process using a photo cross-linker, PEGDA, and a photoinitiator, Irgacure-2959 (I-2959). Results from scanning electron microscopy and in vitro BSA release studies from these hydrogels demonstrated that PNIPAAm nanoparticles were embedded inside the PEG polymeric matrix and the composite material was able to release BSA in response to changes in temperature. These PNIPAAm nanoparticle hydrogel networks may have advantages in applications of controlled drug delivery systems because of their temperature sensitivity and their ability of in situ photopolymerization to localize at the specific region in the body.