Oscillatory shear and viscosity measurements have been carried out on semidilute acid aqueous systems of unmodified chitosan (UM-chitosan) and of hydrophobically modified chitosan (HM-chitosan) with three different degrees of C12-aldehyde substitution. These systems form physical gels at higher concentrations. The gel point, determined by the observation of a frequency independent loss tangent, was found to be shifted toward lower concentrations with increasing hydrophobicity. At the gel point, a power law frequency dependence of the dynamic moduli (G＇similar to G "similar to omega(n)) was observed, with n values of 0.36 and 0.46 for the UM-chitosan and the hydrophobically modified chitosans, respectively. These values are interpreted in the framework of a fractal model. The gel strength parameter S increased with decreasing hydrophobicity. The UM-chitosan and HM-chitosan systems exhibited a non-Newtonian shear thinning behavior. This effect is promoted by increasing polymer concentration and hydrophobicity. Both the linear and nonlinear rheological properties elucidate the intricate interplay between hydrophobic associations and entanglement effects.