In the present investigation chitosan has been chemically modified by treating with two different aldehydes like acetaldehyde and propionaldehyde to form Schiff′s bases. Schiff′s bases of chitosan with acetaldehyde and propionaldehyde were named as polymer A and polymer B, respectively. Fourier Transform Infra Red (FTIR) spectral data have confirmed the reaction carried out on chitosan. Drug free polymeric films of chitosan, chemically modified chitosan and chitosan/hydroxypropylmethylcellulose blend were prepared and evaluated for various physicochemical characters. Further, the films were incorporated with anti-inflammatory drug, etoricoxib using glycerol as plasticizer. The drug loaded films were cross-linked with sodium citrate and studied for permeation characteristics across dialysis membrane and rat skin. All the films were evaluated for bursting strength, swelling index, moisture uptake, thickness uniformity, drug content uniformity, tensile strength, percent elongation at break, percent flatness, water vapour transmission rate and in vitro drug permeation study.