Chitosan is one of the most researched biopolymers for healthcare applications, however, being a naturally derived polymer, it is susceptible to endotoxin contamination, which elicits pro-inflammatory responses, skewing chitosan’s performance and leading to inaccurate conclusions. It is therefore critical that endotoxins are quantified and removed for in vivo use. Here, heat and mild NaOH treatment are investigated as facile endotoxin removal methods from chitosan. Both treatments effectively removed endotoxin to below the FDA limit for medical devices (<0.5 EU/mL). However, in co-culture with peripheral blood mononuclear cells (PBMCs), only NaOH-treated chitosan prevented TNF-α production. While endotoxin removal is the principal task, the preservation of chitosan’s structure is vital for the synthesis and lysozyme degradation of chitosan-based hydrogels. The chemical properties of NaOH-treated chitosan (by FTIR-ATR) were significantly similar to its native composition, whereas the heat-treated chitosan evidenced macroscopic chemical and physical changes associated with the Maillard reaction, deeming this treatment unsuitable for further applications. Degradation studies conducted with lysozyme demonstrated that the degradation rates of native and NaOH-treated chitosan-genipin hydrogels were similar. In vitro co-culture studies showed that NaOH hydrogels did not negatively affect the cell viability of monocyte-derived dendritic cells (moDCs), nor induce phenotypical maturation or pro-inflammatory cytokine release.