Environmentally sensitive polysaccharide nanoparticles (NPs) were prepared by in situ polymerization of N-isopropylacrylamide (NIPAAm) monomer in the presence of chitosan (CS) micelles. First, CS was found to develop a cationic micelle-like structure in the acetic acid solution when its concentration was increased to above the critical micelle concentration, as evidenced by fluorescence and TEM. When the NIPAAm was polymerized in the CS micelle solution by using potassium persulfate as initiator, the produced PNIPAAm with anionic chain end(s) became hydrophobic, as long as the reaction temperature was above its phase transition temperature; and therefore it would diffuse into the hydrophobic core of the CS micelles, producing CS-PNIPAAm core–shell NPs. Increasing the feeding amount of NIPAAm increased the monomer conversion and therefore the particle size; yet it decreased the surface zeta potential. Moreover, the CS-PNIPAAm NPs were sensitive to both pH value and temperature. For the study of drug release properties, doxycycline hyclate was used as a model drug and loaded into the NPs at pH 4.5 and 25 °C. The result illustrated that these NPs had a continuous drug release behavior up to 1 week, depending on the pH value and temperature. In addition, enzyme or hydrogen peroxide capable of degrading CS shell was added in the solution to facilitate the drug release.