The past few years have witnessed significant work being directed towards drug delivery systems with layer-by layer (LbL) technique prominently featured as one of the most sought after approach. However, majority of the studies were focused on the fabrication of microcapsules which produced numerous drawbacks resulting in reduced applicability. This has spurred research into nanocapsules which has proved to overcome most of the drawbacks that plagued microcapsules by being able to evade the reticulo-endothelial system, exhibit enhanced permeability and retention in tumours etc. The capsules fabricated by the LbL technique requires a suitable combination of cationic and anionic polyelectrolytes which ensures that it is able to effectively protect the cargo it encapsulates as well as enhance its bio-applications. With numerous advantages such as biocompatibility and biodegradability to name a few, chitosan has proved to be an ideal cationic polyelectrolyte. Thus, this thesis focuses on the various therapeutic applications of LbL fabricated chitosan based nanocapsules. The first work focuses on the targeted delivery of the somatostatin analogue, Octreotide conjugated nanocapsules to over expressed somatostatin receptors. These LbL fabricated nanocapsules composed of chitosan and dextran sulfate (CD) encapsulate the anti cancer drug, doxorubicin and are found to attain site specificity as well as enhanced anti-proliferative activity. The results indicated that the nanocapsules were biocompatible and when conjugated with octreotide was found to have an enhanced internalization into SSTR expressing cells, thereby making it a viable strategy for the treatment of tumors that has an over expression of somatostatin receptors such as pancreatic carcinoma, breast carcinoma etc. The objective of the second work was to develop an efficient drug delivery system such as CD nanocapsules for encapsulation of Ciprofloxacin in order to combat infection by Salmonella, an intracellular and intra-phagosomal pathogen. In vitro and in vivo experiments showed that this delivery system can be used effectively to clear Salmonella infection. The increased retention of ciprofloxacin in tissues delivered by CD nanocapsules as compared to the conventional delivery proved that the same therapeutic effect was obtained with reduced dosage and frequency of Ciprofloxacin administration. The third work deals with the probiotic, Saccharomyces boulardii which is found to be effective against several gastrointestinal diseases but had limited clinical application due to its sensitivity to acidic environment. However, encapsulation of S. boulardii with chitosan and dextran sulfate ensured enhanced viability and selective permeability on exposure to acidic and alkaline conditions experienced during gastro intestinal transit. The final work involves the fabrication of novel pH responsive nanocapsules composed of chitosan-heparin which facilitate the intracellular delivery of a model anti-cancer drug, doxorubicin.