Of many polymeric biomaterials, hydrogels are of special importance because of their favorable biocompatibility and pertinence in delivering delicate bioactive agents such as proteins. Physical hydrogels have attracted much attention for controlled drug delivery because of the mild and aqueous conditions involved in trapping bioactive agents. This paper reviews our recent progress on developing a new class of physical hydrogels based on the supramolecular self-assembly between cyclodextrins and bioabsorbable poly(ethylene oxide) (PEO) or its copolymers. Being thixotropic, the hydrogels can be injected through needles and applied as injectable drug delivery systems. The properties of the hydrogels also can be fine-tuned with triblock copolymers where PEO segments flank hydrophobic or biodegradable segments in the middle.