Summary Chitosan was modified using H2O2 and ascorbic acid with different incubation temperatures (4–40 °C). The properties of modified chitosan, including its oil entrapment ability, water solubility and the lipase‐resistant activities, using in vitro intestine model system were determined. Nuclear magnetic resonance analysis showed that ascorbic acid was bound to modified chitosan. All of the modified chitosan from 4 to 40 °C demonstrated improved water solubility (even in pH 7) compared to non‐modified chitosan, which was only soluble at pH 4. Modified chitosan from 4 °C exhibited 27.40% of oil entrapment ability which was approximately four times higher than 6.87% of non‐modified chitosan. Modified chitosan from 4 and 40 °C had increased resistance against lipase activity compared to other biopolymers, including beeswax, carnauba wax and non‐modified chitosan. Modified chitosan could be used as a new food ingredient due to their high water solubility, oil‐entrapping ability and resisting lipase activity.