Thermosensitive chitosan hydrogels—renewable, biocompatible materials—have many applications as injectable biomaterials for localized drug delivery in the treatment of a variety of diseases. To combat infections such as Staphylococcus aureus osteomyelitis, localized antibiotic delivery would allow for higher doses at the site of infection without the risks associated with traditional antibiotic regimens. Fosfomycin, a small antibiotic in its own class, was loaded into a chitosan hydrogel system with varied beta-glycerol phosphate (β-GP) and fosfomycin (FOS) concentrations. The purpose of this study was to elucidate the interactions between FOS and chitosan hydrogel. The Kirby Bauer assay revealed an unexpected concentration-dependent inhibition of S. aureus, with reduced efficacy at the high FOS concentration but only at the low β-GP concentration. No effect of FOS concentration was observed for the planktonic assay. Rheological testing revealed that increasing β-GP concentration increased the storage modulus while decreasing gelation temperature. NMR showed that FOS was removed from the liquid portion of the hydrogel by reaction over 12 h. SEM and FTIR confirmed gels degraded and released organophosphates over 5 days. This work provides insight into the physicochemical interactions between fosfomycin and chitosan hydrogel systems and informs selection of biomaterial components for improving infection treatment.