Prodigiosin, a red bacterial pigment is a compound with promising therapeutic properties. Major hindrance in applying prodigiosin in pharmaceutics is the insolubility in water and lack of bioavailability. This study aims to optimize two different types of chitosan based delivery systems, microspheres and nanoparticles for prodigiosin derived from Serratia marcescens NITDPER1 through Taguchi method and determine toxicity perspectives. The results revealed 0.5 % chitosan, 1 % sodium-alginate and 5 % CaCl2 optimum for microsphere and 0.1 % chitosan, 1.5 % TPP and 1.5 % acetic acid for nanoparticle with the entrapment efficiency and maximum release of 89.27 ± 1.2 % and 87.42 ± 1.9 % for microspheres and 96.36 ± 1.7 % and 91.58 ± 2.1 % for nanoparticles. Particle size was 93.03 ± 0.3 μm and 75.1 ± 1.4 nm for micro and nanoformulations. Kinetic parameters of release fitted best with Korsmeyer-Peppas model. Swelling index of microsphere and nanoparticles in pH 6.8 was 799 ± 7.1 % and 35.3 ± 2.1 % respectively. FESEM, FT-IR and XRD revealed spherical morphology, preservation of prodigiosin functional groups and amorphous nature of the formulations. Anticancer IC50 values were (μg mL−1) 11.7 ± 1.2, 10.8 ± 1.4 and 9.4 ± 0.8 for free prodigiosin, microsphere and nanoparticles respectively. Toxicity studies on HEK-293 cell line, Daphnia magna and zebrafish model determined non-toxic nature of the bacterial prodigiosin and its formulations revealing suitability of animal system application.