This work aims to develop a sustained-release drug delivery agent for diclofenac sodium (Ds), an anti-inflammatory drug. For this purpose, a multifunctional hydrogel composite (CsP@Ag) was developed using a natural, biocompatible polymer, chitosan (Cs) as a base polymer, 2,6-pyridinedicarboxaldehyde as a bifunctional cross-linker, and silver nitrate (AgNO3), to enhance the structural properties. The reaction proceeds via Schiff base condensation, which was confirmed by the primary characterization techniques. The resulting hydrogel composite exhibits a honeycomb-like porous morphology, with a mesoporous structure and an average pore diameter of 38.8 nm. The physicochemical characterization validated the successful formation of CsP@Ag, and the enhancement in the thermomechanical properties by incorporation of AgNO3 was also confirmed. Notably, CsP@Ag exhibits temperature-dependent swelling and pronounced pH responsiveness, achieving maximum swelling (4268%) at neutral pH. These stimuli-responsive properties enabled efficient drug loading and tailored release behavior. Ds was loaded at alkaline pH, in view of its solubility profile, while the in vitro drug release was performed at physiological pH. The kinetics demonstrated a sustained and controlled release behavior, and the results fit the Korsmeyer-Peppas model. The designed drug delivery system was subjected to cytotoxicity and biocompatibility tests as well. Overall, the prominent properties of CsP@Ag, like environmental responsiveness, prolonged release performance, and biocompatibility, offer the promising potential for advanced therapeutic applications.