Poria cocos alkali-soluble polysaccharide (PCAP), a water-insoluble β-glucan, is the main component of the total dried sclerotia of Poria cocos. However, its gelation behaviour and properties have yet to be comprehensively studied. In this study, an acid-induced physical hydrogel based on natural PCAP is fabricated. The acid-induced gelation in PCAP is explored with respect to the pH and polysaccharide concentration. PCAP hydrogels are formed in the pH range of 0.3-10.5, and the lowest gelation concentration is 0.4 wt%. Furthermore, dynamic rheological, fluorescence, and cyclic voltammetry measurements are performed to elucidate the gelation mechanism. The results reveal that hydrogen bonds and hydrophobic interactions play a dominant role in gel formation. Subsequently, the properties of the PCAP hydrogels are investigated using rheological measurements, scanning electron microscopy, gravimetric analysis, free radical scavenging, MTT assays, and enzyme-linked immunosorbent assays. The PCAP hydrogels exhibit a porous network structure and cytocompatibility, in addition to good viscoelastic, thixotropic, water-holding, swelling, antioxidant, and anti-inflammatory activities. Furthermore, using rhein as a model drug for encapsulation, it is demonstrated that its cumulative release behaviour from the PCAP hydrogel is pH dependent. These results indicate the potential of PCAP hydrogels for application in biological medicine and drug delivery.