Recently nasal delivery of insulin has gained considerable attention. Some limitations of this route include rapid mucociliary clearance of the drug from the site of deposition resulting in short time span available for absorption and low permeability of the nasal membrane for peptides. The objective of the present study was development of a chitosan bioadhesive gel for nasal delivery of insulin. A nasal perfusion test was used to study the toxicity of 4 absorption enhancers: saponin, sodium deoxycholate, ethylendiamine tetra-Acetic Acid (EDTA) and lecithin. The gels contained 4,000 Iu/dl insulin, 2 or 4% of low and medium molecular weight of chitosan, and lecithin or EDTA. Drug release was studied by a membraneless diffusion method and bioadhesion by a modified tensiometry test. The optimized gel was administered nasally in diabetic rats. The serum insulin levels were analyzed by an insulin enzyme immunoassay kit and serum glucose by glucose oxidase method kits. Formulations containing 2% of low molecular weight of chitosan with EDTA had higher release percentage and dissolution efficiency (DE)(2.5%), lower T(50%) (Time required to release 50% of the drug), mean dissolution time, and bioadhesion than gels containing 4% of medium molecular weight of chitosan with lecithin. Insulin was released by a zero-order kinetic from the gels. The gel of 2% medium molecular weight of chitosan with EDTA caused increase in insulin absorption and reduction the glucose level by as much as 46% of the intravenous route. Considering our in vitro and in vivo studies, the proposed gel formulation could be a useful preparation for controlled delivery of insulin through the nasal route.