This study aims to increase the skin permeability, enhance the loading efficiency of transdermal drugs and their sustained release characteristics using a novel nanocomposite hydrogel derived from in-situ formed AuNPs incorporated carboxymethyl cellulose (CMC) crosslinked with poly (methacrylic acid). With variation of reaction conditions/factors, various grades of crosslinked hydrogels/nanocomposites have been synthesized and optimized on the basis of lower % swelling and higher % crosslinking. The developed composite hydrogel has been characterized using FTIR and NMR spectroscopy, FESEM analysis, XRD analysis, TGA analysis, UV-Visible diffuse reflectance study, AFM study and TEM analysis. Rheological study has been performed to explain the gel strength. The nanocomposite hydrogel is biodegradable. The cytotoxicity study has been performed using human mesenchymal stem cells (hMSCs) that confirms the non-cytotoxic nature of the composite hydrogel. In-vitro release of diltiazem hydrochloride (DHL) and diclofenac sodium (DFS) suggests that in-situ incorporation of AuNPs on crosslinked CMC enhanced the penetration power of nanocomposite hydrogel and released the drugs in controlled way (similar to 85% for DHL and similar to 79% for DFS released in 3 days).(C) 2017 Elsevier Ltd. All rights reserved.