Using chemical inhibitors to reduce soil nitrification decreases emissions of environmental damaging nitrate and nitrous oxide and improves nitrogen use efficiency in agricultural systems. The efficacy of nitrification inhibitors such as dicyandiamide (DCD) is limited in soil due to biodegradation. This study investigated if the persistence of DCD could be sustained in soil by slow release from a chitosan hydrogel. DCD was encapsulated in glyoxal-crosslinked chitosan beads where excess glyoxal was (i) partly removed (C beads) or (ii) allowed to dry (CG beads). The beads were tested in water and in soil. The beads contained two fractions of DCD: one which was quickly released in water, and one which was not. A large DCD fraction within C beads was readily available: 84% of total DCD bead content was released after 9 h immersion in water, while between 74% and 98% was released after 7 d in soil under low to high moisture conditions. A lower percentage of encapsulated DCD was readily released from CG beads: 19% after 9 h in water, and 33% after 7 d in soil under high rainfall conditions. Kinetic analysis indicated that the release in water occurred by quasi-Fickian diffusion. The results also suggest that DCD release was controlled by bead erosion and the leaching of glyoxal derivatives, predominantly a glyoxal-DCD adduct whose release was positively correlated with that of DCD (R2 = 0.99, p ⩽ 0.0001). Therefore, novel chitosan/glyoxal composite beads show a promising slow-release potential in soil for agrochemicals like DCD.