Chitosan has been extensively used to prepare hydrogel systems. The fact that chemically and ionically crosslinked chitosan hydrogels can slowly release drugs through swelling have enabled their use in drug delivery applications. In addition, the high porosity of these hydrogels ensures a more effective cell loading and depending on the pore size and interconnectivity, it can lead to cell differentiation and eventually tissue formation. The purpose of this review is to take a closer look at the use of chitosan hydrogels to prepare drug delivery systems and scaffolds for tissue engineering. Aspects involving chitosan structure, physicochemical properties and biological applications are also discussed. In addition, this article reviews the methods used to prepare chitosan hydrogels and the mechanisms involved in the release of drugs.