The nasal drug delivery system has been a promising route for delivery of proteins and peptides as it can avoid degradation in the gastrointestinal tract and metabolism by liver enzymes. However, due to the rapid mucociliary clearance, the bioavailability of proteins and peptides is still low. Hence, mucoadhesive microspheres may prolong the residence time of peptide drugs in nasal cavity and improve their absorption. In the present study chitosan microspheres loaded with a model peptide vancomycin hydrochloride were prepared. Drugexcipient compatibility studies were done to investigate and predict any possible interactions between the components in the formulation. The prime objective of the study was to check the influence of different process variables and formulation parameters on the two key parameters viz particle size and percentage entrapment efficiency of vancomycin loaded chitosan microspheres and to develop a formulation with desirable particle size for nasal delivery and with maximum possible entrapment efficiency. Drug-excipient compatibility study indicates that vancomycin hydrochloride is compatible with the polymer chitosan. Drug loaded chitosan microspheres were successfully prepared by the emulsification-crosslinking technique. The results indicate that the selected process variables and formulation parameters significantly affect the particle size and percentage entrapment efficiency of drug-loaded microspheres. An optimum formulation is obtained using at 4% w/v of chitosan concentration, 1:10 aqueous to oil phase ratio, 0.5 ml volume of glutaraldehyde with a cross-linking time of 1 h, with stirring speed 1000 tpm and 1% w/v concentration of Span 80 as a stabilizer. Further, optimized microspheres show controlled release for 8 h, which follows the Higuchi model. INTRODUCTION: With the recent remarkable progress in biotechnology, a class of clinically available peptide and protein drugs has been expanding more than ever. Generally, drugs can be administered via various parenteral or nonparenteral routes and the choice of the route normally depends on several key factors such as clinical advantages, convenience of administration, properties of the drugs.