Localized drug delivery is emerging as an effective technique due to its ability to administer therapeutic concentrations and controlled release of drugs to cancer sites in the body. It also prevents the contact of harsh chemotherapy drugs to healthy regions in the body that otherwise would become exposed to current treatments. This study reports on a model chemotherapy drug delivery system comprising non-ionic surfactant vesicles (niosomes) packaged within a temperature-sensitive chitosan network. This smart packaging, or package-within-a package system, provides two distinct advantages. First, the gel prevents circulation of the niosomes and maintains delivery in the vicinity of a tumor. Secondly, the chitosan network protects the niosomes against fluctuations in tonicity, which affects delivery rates. Tonicity is the sum of the concentrations of the solutes which have the capacity to exert an osmotic force across the membrane. Release rates were monitored from both bare niosomes alone and niosome-embedded, chitosan networks. It was observed that chitosan networks prolonged delivery from 100 hours to 55 days in low ionic strength environment and pH conditions similar to a tumor site. The primary effect of chitosan is to add control on release time and dosage, and stabilize the niosomes through a high ionic strength surrounding that prevents uncontrolled bursting of the niosomes. Secondary factors include cross-link density of the chitosan network, molecular weight of the individual chitosan polymers, dye concentration within the niosomes, and the number density of niosomes packaged within the chitosan network. Each of these factors can be altered to fine-tune release rates. Release rate experiments were conducted with 5,6-carboxyfluorescein, a fluorescent dye and chemotherapeutics paclitaxel and carboplatin. In vitro studies showed a preferential affinity of the smart packaged system to ovarian carcinoma cell line OV2008 as compared to normal epithelial cell lines of Ilow and MCC3. Further, feasibility of the drug delivery system was evaluated in vivo. Toxicity studies revealed that the system was non-toxic and feasible in vivo. The final outcome of this study includes tuning of the variables mentioned above that will contribute to the development of low cost and improved methods for drug delivery with application to intracavitary ovarian cancer treatment and other types of cancer