Chitosan-coated alginate microspheres containing a lipophilic marker dissolved in an edible oil, were prepared by emulsification/internal gelation and the potential use as an oral controlled release system investigated. Microsphere formation involved dispersing a lipophilic marker dissolved in soybean oil into an alginate solution containing insoluble calcium carbonate microcrystals. The dispersion was then emulsified in silicone oil to form an O/W/O multiple phase emulsion. Addition of an oil soluble acid released calcium from carbonate complex for gelation of the alginate. Chitosan was then applied as a membrane coat to increase the mechanical strength and stabilize the microspheres in simulated intestinal media. Parameters studied included encapsulation yield, alginate concentration, chitosan molecular weight and membrane formation time. Mean diameters ranging from 500 to 800 micron and encapsulation yields ranging from 60 to 80% were obtained. Minimal marker release was observed under simulated gastric conditions, and rapid release was triggered by transfer into simulated intestinal fluid. Higher overall levels of release were obtained with uncoated microspheres, possibly due to binding of marker to the chitosan membrane coat. However the slower rate of release from coated microspheres was felt better suited as a delivery vehicle for oil soluble drugs.