Purpose of Review <p>Chitosan and its derivatives have emerged as promising multifunctional biomaterials for the management of diabetes and its complications. Their natural biodegradability, biocompatibility, and mucoadhesive properties make them ideal candidates for advanced drug delivery. Through chemical modifications such as quaternization, carboxymethylation, and thiolation, chitosan derivatives exhibit enhanced solubility, permeability, and targeted delivery potential.</p> Recent Findings <p>These attributes enable the effective transport of anti-diabetic agents like insulin, metformin, and phytochemicals via buccal, oral, and transdermal routes, improving therapeutic efficacy and patient compliance. Chitosan based nano-carriers, hydrogels, and electro-spun nanofiber systems support sustained and stimuli-responsive drug release, particularly beneficial for chronic conditions like diabetes. In diabetic wound-healing, formulations combining chitosan derivatives with bioactive agents such as curcumin, asiaticoside, and silver nanoparticles, have shown to accelerate re-epithelialization, reduce oxidative stress, promote angiogenesis, and inhibit bacterial biofilms. These systems provide an extracellular matrix-mimicking environment conducive to fibroblast and endothelial cell proliferation.</p> Summary <p>Beyond glucose control, chitosan derivatives show potential in addressing diabetic complications such as nephropathy, neuropathy, and retinopathy. Their versatility allows integration with metal nanoparticles, growth factors, and natural ligands for personalized and precision therapeutics. However, challenges such as scalability, regulatory hurdles, and long-term safety assessments must be addressed for successful clinical translation. This review highlights the broad therapeutic landscape of multifunctional chitosan derivatives in diabetes, encompassing both advanced drug delivery platforms and wound-healing applications, and emphasizing their evolving role from conventional carriers to smart, bioactive therapeutic systems. Unlike previous reviews that mainly summarize formulation strategies, this article integrates drug delivery and diabetic wound-healing applications and provides a critical, clinically oriented discussion of bioavailability thresholds, degree of deacetylation requirements, safety, and regulatory and translational barriers for chitosan-based systems. Continued interdisciplinary research and innovation are essential to realize their full potential in next-generation diabetic care.</p>