Chitosan microspheres were prepared using an emulsification-coacervation technique. The w/o emulsion comprised a mixture of light and heavy liquid paraffins containing sodium dioctyl sulphosuccinate as the oil phase and chitosan solution as the aqueous phase. Pentasodium tripolyphosphate was included as a counterion. The chitosan microspheres obtained showed a high degree of aggregation. This was markedly reduced, by the incorporation of magnesium stearate in the disperse phase. The resultant microspheres were then discrete, spherical with smooth surfaces. Additionally, with an increasing magnesium stearate content, larger-sized microspheres were produced. The DSC analysis data suggested that the magnesium stearate was converted to stearic acid during the preparation process. Chitosan microspheres containing propranolol hydrochloride were similarly prepared, but their surface was convoluted and their shape not well defined. Unlike the microspheres without drug, the size of the drug-loaded microspheres decreased with increasing magnesium stearate content. The release of propranolol hydrochloride from the microspheres was fast, irrespective of the content of magnesium stearate. Drug encapsulation efficiency was enhanced when a greater amount of magnesium stearate was used.