Chitosan is not soluble in water, which limits its wide application particularly in the medicine and food industry. In the present study, water soluble chitosan (WSC) was prepared by hydrolyzing chitosan using hydrogen peroxide under the catalysis of phosphotungstic acid in homogeneous phase. Factors affecting hydrolysis were investigated and the optimal hydrolysis conditions were determined. The WSC structure was characterized by Fourier transform infrared spectroscopy. The resulting products were composed of chitooligosaccharides of DP 2–9. The WSC content of the product and the yield were 94.7% and 92.3% (w/w), respectively. The results indicate that WSC can be effectively prepared by hydrolysis of chitosan using hydrogen peroxide under the catalysis of phosphotungstic acid.