The hydrophobic modification of chitosan was performed by the incorporation of aromatic phendione to the amino group of chitosan to improve the hydrophobic drug encapsulation efficiency and anticancer activity. The phendione‐modified chitosan was coated with the copper oxide (CuO) nanoparticles to obtain the hybrid material for the model drug (curcumin) delivery. The synthesized hybrid nanoparticles were characterized by Fourier transform infrared, proton nuclear magnetic resonance, thermogravimetric analysis, X‐ray diffraction, atomic force microscopy, and scanning electron microscopy techniques. The extent of phendione modification on chitosan, presence of CuO nanoparticles, drug encapsulation, and size and morphology of the prepared hybrid materials were observed by using the techniques mentioned. The drug release studies were performed on simulated gastric fluid (pH 1.2) and simulated body fluid (pH 7.4) to analyze the release kinetics of curcumin from the chitosan and chitosan–phendione with CuO. The drug release was also monitored at different initial drug loading conditions. As the initial loading of drug decreased, the rate of drug release was also decreased. Mostly, the drug release followed a non‐Fickian, case II type transport mechanism. The drug‐loaded chitosan–phendione and chitosan with CuO nanoparticles were investigated for anticancer activities toward the cell lines M19‐MEL, MCF‐7, and HeLa. © 2017 Curtin University and John Wiley & Sons, Ltd.