The objective of this study was to prepare and evaluate a novel spray-dried tableting excipient using a mixture of chitosan and lactose. Three different grades of chitosan (low-, medium-, and high-molecular-weight) were used for this study. Propranolol hydrochloride was used as a model drug. A specific amount of chitosan (1, 1.9, and 2.5 g, respectively) was dissolved in 50 mL of an aqueous solution of citric acid (1%) and later mixed with 50 mL of an aqueous solution containing lactose (20, 19.1, and 18.5 g, respectively) and propanolol (2.2 g). The resultant solution was sprayed through a laboratory spray drier at 1.4 mL/min. The granules were evaluated for bulk density, tap density, Carr index, particle size distribution, surface morphology, thermal properties, and tableting properties. Bulk density of the granules decreased from 0.16 to 0.13 g/mL when the granules were prepared using medium- or high-molecular-weight chitosan compared with the low-molecular-weight chitosan. The relative proportion of chitosan also showed a significant effect on the bulk density. The granules prepared with 1 g of low-molecular-weight chitosan showed the minimum Carr index (11.1%) indicating the best flow properties among all five formulations. All three granules prepared with 1 g chitosan, irrespective of their molecular weight, showed excellent flow properties. Floating tablets prepared by direct compression of these granules with sodium bicarbonate showed 50% drug release between 30 and 35 min. In conclusion, the spray-dried granules prepared with chitosan and lactose showed excellent flow properties and were suitable for tableting.