Hydrogel based scaffolds for neural tissue engineering can provide appropriate physico-chemical and mechanical properties to support neurite extension and facilitate transplantation of cells by acting as 'cell delivery vehicles'. Specifically, in situ gelling systems such as photocrosslinkable hydrogels can potentially conformally fill irregular neural tissue defects and serve as stem cell delivery systems. Here, we report the development of a novel chitosan based photocrosslinkable hydrogel system with tunable mechanical properties and degradation rates. A two-step synthesis of amino-ethyl methacrylate derivitized, degradable, photocrosslinkable chitosan hydrogels is described. When human mesenchymal stem cells were cultured in photocrosslinkable chitosan hydrogels, negligible cytotoxicity was observed. Photocrosslinkable chitosan hydrogels facilitated enhanced neurite differentiation from primary cortical neurons and enhanced neurite extension from dorsal root ganglia (DRG) as compared to agarose based hydrogels with similar storage moduli. Neural stem cells (NSCs) cultured within photocrosslinkable chitosan hydrogels facilitated differentiation into tubulin positive neurons and astrocytes. These data demonstrate the potential of photocrosslinked chitosan hydrogels, and contribute to an increasing repertoire of hydrogels designed for neural tissue engineering.