The generally poor mechanical stability of hydrogels limits their use as functional materials for many biomedical applications. In this work, a poly(vinyl alcohol) (PVA) embedded hybrid hydrogel of a β-amino acid-containing Fmoc-protected tripeptide was produced at physiological pH (7.4) and room temperature. The hydrogel system was characterized by a number of techniques, including UV-vis, fluorescence, circular dichroism, FT-IR spectroscopy, electron microscopy, and rheology. While the tripeptide-based pure hydrogel was found to be unstable after ca. half an hour, addition of PVA, a water soluble polymer, increased the temporal and mechanical stability of the hydrogel. A rheological step-strain experiment demonstrates that the peptide-polymer hydrogel is thixotropic. Results from a fluorescence probe study and transmission electron microscopy reveal that addition of PVA increases both the fibre diameter and entanglement. Circular dichroism spectra of the hydrogels confirm the formation of aggregates with supramolecular chirality. The thixotropic nature of the hydrogel has been exploited to entrap and release doxorubicin, an anticancer drug, under physiological conditions. Furthermore, an MTT assay of the Fmoc-tripeptide using AH927 cells confirmed its cytocompatibility, which broadens the utility of the hybrid gel for biomedical applications.