The present invention provides a biocompatible and biodegradable thermogelling composite composition which may be used as a local drug delivery system for controlled and sustained release of drug. More particularly, the present invention provides a thermogelling composite composition comprising a chitosan solution consisting of plurality of drug loaded polycaprolactone (PCL) particles, wherein thecomposition turns into gel with time and by increasing the Ph and temperature. The present invention also provides a process for preparing the thermogelling composite composition