Undoubtedly, there is an increasing inclination towards the development of hydrogels derived from natural sources for the purpose of delivering hydrophobic antibiotics. In this study, alginate hydrogels containing cellulose nanofibrils (CNF) were synthesized from solid waste agar industry (SWAI) via Hydrated deep eutectic solvent (DES) hydrolysis and mechanical treatment, intending to encapsulate chloramphenicol and examine the properties of the alginate-CNF (ALG-CNF) hydrogel at various CNF concentrations. The CNF displays a fibrous morphology, surface charge of − 39.3 ± 0.3 mV, 62.95% crystallinity, and type-I cellulose. The incorporation of CNF notably affected the characteristics of the ALG-CNF hydrogel. Chloramphenicol was effectively encapsulated within the ALG-CNF hydrogel matrix. Chloramphenicol release showed a biphasic profile, with controlled release occurring within 48 h. The drug release kinetics adhered to the Korsmeyer-Peppas model, reflecting pseudo-Fickian diffusion (n < 0.45), with a high determination coefficient (R² ≈ 0.95). Antibacterial susceptibility tests demonstrated that ALG-CNF hydrogels inhibited the growth of E. coli, S. aureus, and P. aeruginosa. The ALG-CNF hydrogel demonstrated favorable physical properties, drug release, and antibacterial properties, making it a prospective candidate for future studies on wound dressings and hydrophobic drug delivery systems.