Polymeric scaffold for tissue regeneration was developed for veterinary applications. Oxytetracycline hydrochloride (OTC), which is a widely used antibiotic in veterinary medicine was chosen as the model compound. Gel formulations using chitosan and alginate were prepared in distilled water or in 1% (v/v) acetic acid solution. Sponges were also prepared by a freeze-drying process. Tripolyphosphate was used for cross-linking. Viscosity was decreased in the presence of OTC in chitosan gels whereas no difference was found with alginate gels. All gels showed pseudoplastic behaviour. Water absorption capacity was highest with chitosan/alginate sponges. The solvent used for preparation of the chitosan gels was found to affect the release of OTC. The release of OTC from the sponges was increased by cross-linking. Chitosan/alginate sponges showed the slowest and lowest drug release among the developed sponge formulations in this study. The formulations were found to be biocompatible, inducing no adverse reaction in vivo on surgically formed bone defects of radius of rabbits. The level of organization of the remodelled new bone in the treatment groups was better than that of control. Incorporation of OTC into formulations did not show any considerable enhancing effect.