The physicochemical and rheological properties of a water-soluble chitosan (WSC) derivative were characterized in order to facilitate its use as a novel material for biomedical applications. The WSC was prepared by conjugating glycidyltrimethylammonium chloride (GTMAC) onto chitosan chains. Varying the molar ratio of GTMAC to chitosan from 31 to 61 produced WSCs with a degree of substitution (DS) that ranged from 56% to 74%. The WSC with the highest DS was soluble in water up to concentrations of 25 g/dL at room temperature. An increase in the polymer concentration gradually increased both the pH and conductivity of the WSC solutions. The rheological properties of the WSC solutions were found to be dependent on the salt and polymer concentrations as well as the DS value. In the absence of salt, the rheological behavior of the WSC was found to be typical of that for a polyelectrolyte in the dilute solution regime. However, the addition of salt decreased the viscosity of the polymer solution due to the reduction of electrostatic repulsions by the positively charged trimethylated ammonium groups of the WSC. In the concentrated regime, the viscosity of the WSCs was found to follow a power-law expression. The lowest DS WSC had the more favorable viscoelastic properties that were attributed to its high molecular weight, as confirmed by the stress relaxation spectra and intrinsic viscosity measurements. The effect of DS on the degree of interaction between WSC and the lipid egg phosphatidylcholine was investigated by FTIR analysis. Overall, the lower DS WSC had enhanced rheological properties and was capable of engaging in stronger intermolecular physical interactions.