Biomedicine is constantly evolving to ensure a significant and positive impact on healthcare, which has resulted in innovative and distinct requisites such as hydrogels. Chitosan-based formulations stand out for their versatile utilization in drug encapsulation, transport, and controlled release, which is complemented by their biocompatibility, biodegradability, and non-immunogenic nature. Stimuli-responsive hydrogels, also known as smart hydrogels, have strictly regulated release patterns since they respond and adapt based on various external stimuli. Moreover, they can imitate the intrinsic tissues’ mechanical, biological, and physicochemical properties. These characteristics allow stimuli-responsive hydrogels to provide cutting-edge, effective, and safe treatment. Constant progress in the field necessitates an up-to-date summary of current trends and breakthroughs in the biomedical application of stimuli-responsive chitosan-based hydrogels, which was the aim of this review. General data about hydrogels sensitive to ions, pH, redox potential, light, electric field, temperature, and magnetic field are recapitulated. Additionally, formulations responsive to multiple stimuli are mentioned. Focusing on chitosan-based smart hydrogels, their multifaceted utilization was thoroughly described. The vast application spectrum encompasses neurological disorders, tumors, wound healing, and dermal infections. Available data on smart chitosan hydrogels strongly support the idea that current approaches and developing novel solutions are worth improving. The present paper constitutes a valuable resource for researchers and practitioners in the currently evolving field.