Recently, nano- and micro-particulate systems have been widely utilized to deliver pharmaceutical compounds to achieve enhanced therapeutic effects and reduced side effects. Poly (DL-lactide-co-glycolide) (PLGA), as one of the biodegradable polyesters, has been widely used to fabricate particulate systems because of advantages including controlled and sustained release, biodegradability, and biocompatibility. However, PLGA is known for low encapsulation efficiency (%) and insufficient controlled release of water-soluble drugs. It would result in fluctuation in the plasma levels and unexpected side effects of drugs. Therefore, the purpose of this work was to develop microcapsules loaded with alginate-coated chitosan that can increase the encapsulation efficiency of the hydrophilic drug while exhibiting a controlled and sustained release profile with reduced initial burst release. The encapsulation of nanoparticles in PLGA microcapsules was done by the emulsion solvent evaporation method. The encapsulation of nanoparticles in PLGA microcapsules was confirmed by scanning electron microscopy and confocal microscopy. The release profile of hydrophilic drugs can further be altered by the chitosan coating. The chitosan coating onto alginate exhibited a less initial burst release and sustained release of the hydrophilic drug. In addition, the encapsulation of alginate nanoparticles and alginate nanoparticles coated with chitosan in PLGA microcapsules was shown to enhance the encapsulation efficiency of a hydrophilic drug. Based on the results, this delivery system could be a promising platform for the high encapsulation efficiency and sustained release with reduced initial burst release of the hydrophilic drug.