Alginate hydrogel is broadly known for its potential as an encapsulation agent due to its compatibility and versatility. Despite its predominance, alginate hydrogel naturally has macropores and a less rigid structure, which leads to syneresis and uncontrolled diffusion of bioactive compounds from the gel network. Combining alginate with other biopolymers has been considered to improve its properties as an encapsulation agent. This research aimed to evaluate the effect of Crystalline Nanocellulose (CNC) to the physical properties and the diffusion of gallic acid (GA), as a water-soluble polyphenol model, through the alginate-CNC composite hydrogels performed as an encapsulation agent. The hydrogel mixtures were made from 1:0, 1:1, 2:0, 2:1, 2:2, and 2:3 solid-basis ratio of sodium alginate:crystalline nanocellulose and evaluated for syneresis, gel strength and stiffness, rehydration properties and gel porosity. Alginate-CNC and GA interaction was observed through zeta-potential analysis and Fourier Transform Infrared (FTIR) spectroscopy. Results showed that composite hydrogel with the highest proportion of CNC increased the gel rehydration capacity (87.33 %), gel strength and stiffness as well as reduced the gel syneresis (14.72 %) and dried gel porosity (0.62). GA pre-loaded gel with 2:2 and 2:3 S-C ratios reduced the diffusion of gallic acid by 92.07–92.27 %. FTIR showed hydrogen bonding between GA and the alginate-CNC hydrogel. Alginate-CNC hydrogel had a fibrous and compact structure as shown in the cryo-SEM and confocal microscope images.