The aim of this study was to evaluate the cytotoxicity and gelation of thermosensitive chitosan-beta-glycerol phosphate (GP) solutions, which undergo sol-gel transition around body temperature. Chitosan 0.5-2% (w/v) mixed with GP 5-20% (w/v) solutions all gel at 37 degrees C and possess pH around the physiological range. High GP and chitosan concentrations result in faster gelation time. Extracts of all chitosan concentrations mixed with or without 5% (w/v) GP and 2% (w/v) chitosan combined with 10% (w/v) GP demonstrated up to 34% increase in proliferation rate of goat bone marrow derived mesenchymal stem cells when compared with control medium. Extracts from all other chitosan-GP combinations resulted in reduced cell proliferation relative to control medium. Increasing GP content in the gel resulted in a linear increase in the osmolality of the extracts in contact with the gels. The results of this study indicate that chitosan-GP is a biocompatible hydrogel, extracts of which can stimulate mesenchymal stem cell proliferation at certain concentrations. This material is therefore a promising vehicle for cell encapsulation and injectable tissue-engineering applications.