The formation of associative networks in semidilute aqueous solutions of hydrophobically modified alginate (HM-alginate) is dependent on intermolecular hydrophobic interactions. Addition of beta-cyclodextrin (beta-CD) monomers to the system provides decoupling of these associations via inclusion complex formation with the polymer hydrophobic tails. This results in a dramatic decrease in the viscoelastic response of the system and a more extended local structure of the polymer chains, as shown by small-angle neutron scattering (SANS) measurements. The zero-shear viscosity decreases about an order of magnitude when the beta-CD concentration is increased from 0 to 12 mm. The lifetime of the associative network decreases strongly with increasing levels of beta-CD addition. These findings clearly demonstrate that the hydrophobic association effect is efficiently reduced as the amount of beta-CD is increased. In the framework of drug delivery, this effect may be useful to improve the release of therapeutic molecules that can be entrapped in the polymer matrix.