Hydroxypropyl derivatives of chitosan with different degrees of substitution (DSs) were synthesized successfully via etherification of chitosan with propylene oxide. Phase behavior and liquid-crystalline characteristics of aqueous solutions of hydroxypropyl chitosan (HPCt) were studied by light absorption, polarized optical microscopy (POM), and small-angle light scattering. Aqueous solutions of a highly substituted HPCt (DS=3.25) were phase-separated and became turbid at an elevated temperature of >40°C. The observed cloud point was shifted to higher temperatures with increasing HPCt concentration in the range examined, i.e., 5-60wt%. The phase separation behavior of the aqueous HPCt solutions was affected appreciably by addition of inorganic salts thereinto. POM observations revealed that an optically anisotropic monophase prevailed in the concentrated solutions containing ≥50wt% HPCt (DS=3.25). Oriented HPCt films prepared from the concentrated solutions under shear, exhibited a so-called banded structure characteristic of sheared or elongated liquid-crystalline polymers.