Formulations or delivery systems are provided for controlled release of therapeutically active agents. The delivery systems are composed of polymer and lipid materials and may be prepared as a gel, paste, solution, film, implant or barrier depending on the intended application. The polymer component of the matrix is the naturally occurring biomaterial, chitosan, or a mixture of chitin and chitosan. The lipid component may include phosphatidylcholine, phosphatidylserine, phosphatidylinositol, phosphatidyl or a mixture thereof. The delivery system may be used for delivery of hydrophilic agents, hydrophobic agents or combinations thereof. The therapeutically active agents may be formulated within the matrix as free agents or incorporated into particles. In a preferred embodiment the agents are incorporated into polymeric particles that are dispersed throughout the matrix.