Nanoparticles of approximately 10nm in diameter made with chitosan or lactic acid-grafted chitosan were developed for high drug loading and prolonged drug release. A drug encapsulation efficiency of 92% and a release rate of 28% from chitosan nanoparticles over a 4-week period were demonstrated with bovine serum protein. To further increase drug encapsulation, prolong drug release, and increase chitosan solubility in solution of neutral pH, chitosan was modified with lactic acid by grafting D,L-lactic acid onto amino groups in chitosan without using a catalyst. The lactic acid-grafted chitosan nanoparticles demonstrated a drug encapsulation efficiency of 96% and a protein release rate of 15% over 4 weeks. With increased protein concentration, the drug encapsulation efficiency decreased and drug release rate increased. Unlike chitosan, which is generally soluble only in acid solution, the chitosan modified with lactic acid can be prepared from solutions of neutral pH, offering an additional advantage of allowing proteins or drugs to be uniformly incorporated in the matrix structure with minimal or no denaturization.