An amphiphilic N-octyl-O-poly (ethylene glycol) chitosan was prepared by grafting successively octyl groups onto amino groups at C-2 position as hydrophobic moieties and polyethylene glycol (PEG) groups onto hydroxyl groups at C-6, C-3 as hydrophilic ones. A certain amount of –NH2 was retained in the structure of chitosan derivatives through protection by phthalic anhydride. The chemical structures and degree of N- and O-substitution of chitosan derivatives were characterized by FT-IR, 1HNMR and elemental analysis, respectively. The amphiphilic property for convenient self-assembly and the preserved –NH2 groups for progressive chemical cross-linking make the resultant N-ocyl-O-PEG chitosan soluble in water and potentially applicable in preparing stable chitosan hollow microspheres as drug-carriers.