Hydrogels have been widely utilized in various fields as a function of their tunable physical and biochemical properties. The unique physical properties of hydrogels, including their porosity and swelling capacity, make them favorable platforms for drug delivery. Although chitosan is the most popular natural polymer due to its biocompatibility, low toxicity, biodegradability, and other biofunctional activities, its potential commercial applications are constrained due to its poor solubility in water. Hydroxybutyl chitosan (HBCS) was synthesized in our study to improve its solubility. The HBCS hydrogel exhibited excellent thermo/pH sensitive sol-gel reversibility behavior from 4 °C to the gelation temperature. Additionally, the gelation time and temperature could be optimized by adjusting the HBCS concentration, gelation temperature, and pH value according to clinical requirements. The HBCS hydrogel had both favorable water-solubility and swellability when compared with unmodified chitosan. Moreover, the HBCS demonstrated lower hemolysis at a concentration of 1 mg/mL. The HBCS hydrogel was completely biodegraded after 8 weeks of muscle implantation and 7 weeks of subcutaneous implantation. These results demonstrated that the HBCS hydrogel with biodegradable thermo/pH sensitive sol-gel reversible properties had excellent cytocompatibility, histocompatibility, and biocompatibility as a drug carrier. As such, HBCS holds great promise for future biomedical applications.