Diabetic wounds, a common complication of diabetes, often lead to chronic ulcerations and infections on the lower limbs. Conventional treatments are expensive and often inadequate for advanced cases, necessitating the development of innovative approaches, such as hydrogelbased dressings that support tissue reconstruction and enable the delivery of biologically active substances. This study aimed to develop a multifunctional hydrogel dressing for insulin delivery in diabetic wounds. A hydrogel matrix composed of sodium alginate and poly(vinyl alcohol), modified with allantoin, was created. Insulin-loaded chitosan microspheres were incorporated to enhance the effects of growth factors and regulate glucose levels around the wound site. The research focused on preparing the hydrogel matrix, cross-linking, encapsulating insulin in chitosan microspheres, and evaluating material properties. We assessed microstructure, chemical stability, water absorption, and insulin release kinetics. Fourier-transform infrared spectroscopy (FTIR) and elemental analysis confirmed the presence of insulin and allantoin in the matrix. Hydrated microspheres had diameters ranging from 1089 to 1549 μm, while dehydrated microspheres ranged from 471 to 622 μm. Absorbency was approximately 500% for unbuffered and 1000-1500% for buffered microspheres. Rheological tests confirmed cross-linking of the Alg-PVA sol via cyclic freezing-thawing and specific solutions. Chemical stability tests showed about 40% mass degradation of the Alg-PVA hydrogel over 4 weeks. Overall, the results indicate that the developed hydrogel composition holds potential for further research and development.