Hydrogels are polymeric crosslinked networks which are water-insoluble and hydrophilic and also able to retain a lot of water. Hydrogels offer large free space in swollen stage within the crosslinked network acts as a nanoreactor that not only provides a sufficient space for nucleation and growth of particles but also provides long term stability. Characterization studies established that hydrogel provides a controlled and uniform distribution of nanoparticles within the polymeric network without addition of any further stabilizer. The aim of this work is to develop chitosan–PEG-based hydrogel which act both as a nanoreactor and an immobilization matrix for silver nanoparticles (Ag). With these, higher degree of biocompatibility and long-term antibacterial activity can be achieved. Methylene bisacryle amide used as cross-linking agent for this hydrogel. First of all chitosan-PEG hydrogels with diffrent ratio of polymers were developed to find the best ratio for this work by characterizing the hydrogels. The hydrogel were characterized by swelling ratio and which is important to synthesis Ag nano particles. The more the swelling ratio,the more Ag nano particles were obtained. After characterization, this ratio founded 0.2 g/g of poly ethylene glycol/chitosan. Then at that appropriate ratio, hydrogels with different crosslinking desnities(0.08-0.22 gr of methylene bisacryle amide with Step size of 0.2) were developed. The hydrogel containing Ag with different crosslinking densities were prepared by repeated freeze–thaw treatment cycles at -20 ?C for 6 h and 25 ?C for 2 h, respectively, for next 7 days. Silver nanoparticles inside hydrogel were prepared via in situ reduction of silver nitrate (AgNO3) using sodium borohydride (NaBH4) as reducing agent. In hydrogel network uniformly dispersed silver nanoparticles stabilized by the polymer network were obtained. The variation in cross-link density in the hydrogel network is a simple and facile synthetic strategy to control the size of the nanoparticles and regulate shape of nanostructures such as nanorods, nanocubes. The swelling studies revieled that by increasing the cross-linker amount,the swelling ratio decreases and also in a same amount of cross-linking, by adding Ag nano particles into the networks,the swelling ratio decreases. From the water vapor transmission studies It was founded that this type of wound dressing is suitable for wounds with moderate exudate. The antibacterial studies shows that this hydrogel is antimicrobial and an inhibition zone is abviousely showed in the plate. From ICP-AES test the amount of Ag nano particles inside the gel were determined. This amount is not exceed the permissible amount that is harmefull. Keywords: hydrogel,nano reactor,stability of nano particles, antimacrobial, wound dressing.