Evaluation of the potential for oral sustained drug delivery of formulations with in-situ gelling properties is the main objective of the present investigation. Oral administration of aqueous dispersion of sodium alginate (1.5% w/v) containing calcium ions in complex form resulted in the formation of gel matrix as a consequence of the release of the calcium ions in the acidic environment of stomach fluid. Addition of methylcellulose, sodium chloride and polyethylene glycol improved the drug retention efficacy of the gel. In this investigation, the study on the influence of added excipients on the rheological and drug release properties of the formulations has been focused. In-vitro studies demonstrated diffusion-controlled release of paracetamol from the gels. The bioavailability of orally administered paracetamol from the in-situ gel F4 (composed of 1.5% sodium alginate, 1.5% methyl cellulose, 3% CaCO3, 2% NaCl 0.05% polyethylene glycol) administered in the stomach of rabbit, was more sustained as compared to the commercially available suspension Calpol® containing an identical dose of paracetamol.