This study is focused on developing thermoresponsive nanocomposite hydrogels based on gelatin by the incorporation of a thermoresponsive polymer, poly (N–isopropylacrylamide) (PNIPAM), that can undergo a sol–gel transition by physiological conditions with the aim of minimally invasive drug delivery. Various hybrid nanocomposite hydrogels consisting of gelatin as the matrix and acetaminophen–loaded PNIPAM nanoparticles were prepared using response surface methodology through the design of experiment software. PNIPAM nanoparticles were synthesized using the photopolymerization technique. Nanocomposite hydrogels were characterized by Fourier transform infrared spectroscopy (FTIR), scanning electron microscopy (SEM), swelling capacity, hydrolytic degradation, antibacterial and cell viability measurements, and release studies. Narrow size distribution of PNIPAM nanoparticles was observed, indicating successful polymerization and good size control by the reactor size. The system exhibited a reversible sol–gel transition around 37 °C, close to body temperature. The swelling capacity of nanocomposite hydrogel was found to decrease above the phase transition temperature. Drug–loaded gelatin–PNIPAM nanocomposite hydrogels indicated the antibacterial activity against the gram–positive and gram–negative species. Hydrogels with a lower ratio of PNIPAM to gelatin demonstrated a lower amount, more uniform, and delayed release compared to the other hydrogels, indicating good potential for drug delivery targeted purposes.