Erlotinib is a Tyrosine Kinase Inhibitor (TKI) that is utilized in the treatment of various types of tumors expressing the epidermal growth factor receptors (EGFR) protein. However, it is characterized as a drug with poor solubility in water and a high affinity for blood plasma proteins. According to the biopharmaceutical classification system (BCS), Erlotinib falls under class two, where its solubility acts as the rate-limiting step for its bioavailability. In systemic administration, Erlotinib exhibits a bioavailability of approximately 60%, but it also presents several systemic side effects, which can be severe in certain cases due to its poor solubility in water and its strong binding to plasma proteins. To address the issue of low bioavailability, we pursued an efficient approach to enhance the solubility of Erlotinib. nanoparticle formation using the non-solvent method, and dynamic light scattering (DLS) and in vitro dissolution studies were employed to characterize the Erlotinib nanoparticles (ETB-NPs). These studies also produced favorable outcomes, demonstrating the successful improvement of Erlotinib's solubility through nanoparticle formation. Following the solubility enhancement, the drug was formulated into a local injectable hydrogel for targeted delivery. This formulation exhibited significant improvements in the release of Erlotinib. The solubility enhancement and localized administration of Erlotinib within the tumor microenvironment facilitated controlled release and contributed to the observed enhancements. The chitosan hydrogel used as the carrier system for Erlotinib was thoroughly characterized using various studies, including viscosity measurements, pH determination, and in vitro release studies, all of which yielded positive results.