Osteosarcoma (OS) is the most common type of malignant bone cancer, and the sixth most common type of cancer in children and young adults. Currently, gene therapy is being evaluated as a novel method for OS treatment. Here we report on an in situ gelling chitosan-based hydrogel system that sustains the release of a potential anti-cancer gene (pigment epithelium-derived factor) to the tumor site. A significant reduction of the primary OS in a clinically relevant orthotopic model was measured. The combination of plasmid treatment and chemotherapy together with the use of this delivery system led to the highest suppression of tumor growth without side effects. The results obtained from this study demonstrate the potential application of a biodegradable hydrogel technology as an anti-cancer drug delivery system for successful chemo-gene therapy.