This project was designed to develop pH responsive smart chitosan/agarose‐g‐poly (methacrylate) hydrogels using free radical polymerization for targeted delivery of Capecitabine (a prodrug of 5‐fluorouracil) for the treatment of colorectal cancer. Developed hydrogels were evaluated for drug loading efficiency, thermal stability, compatibility of components, morphology, swelling behavior, release kinetics and acute oral toxicity studies in rabbits. Moreover, pharmacokinetic parameters were also measured in healthy rabbits. Structural entanglement was confirmed via FTIR providing evidence of hydrogel formation. Loading of Capecitabine was in range from 60.35% to 62.57%. Hydrogels showed pH‐responsive behavior by providing maximum swelling of 93.84% at pH 7.4 identical to colon. Release of Capecitabine from hydrogels was in controlled pattern over a period of 36 h. Toxicity studies revealed no signs of ocular, dermal and oral toxicity providing safety evidence of hydrogels. In addition, pharmacokinetic evaluations of Capecitabine loaded hydrogels showed significant increase in plasma half‐life of 17 h and AUC of 57.65 μg.h/ml in comparison to pure Capecitabine solution. Therefore, these results strongly suggest that newly formed hydrogels are biocompatible, capable of providing sustained release at specific pH and can be employed as a cargo for colorectal delivery.