In situ thermo-sensitive hydrogels have attracted increasing attention for alternative cancer therapies due to their long-term and effective drug levels at local sites. Besides synthesizing new thermo-sensitive polymers, we can also fabricate this delivery system by combining a hydrogel with a thermo-response and drug in a different dispersion state, such as drug nanocrystals. However, the impact of the drug dispersion state or dimension on the quality of such a local injectable system is still unknown. So, here we developed and compared three types of F127 hydrogel systems with either paclitaxel or the near infra-red probe DiR in molecules (MOs), nanocrystals (NCs) and microcrystals (MCs), respectively. With 120 nm rod-shape nanocrystals, the NCs-Gel achieved a high drug loading, moderate drug release rate and gel erosion in vitro and in vivo, medium intratumoral drug residue but the best anti-tumor efficacy in 4T1 tumor bearing BALB/c mice. With the free drug solubilized in 20 nm micelles of the gel, the MOs-Gel system demonstrated the least drug loading and the fastest drug release and gel erosion, leading to the least intratumoral residue as well as the lowest anti-tumor effect. Finally, when dispersed in micron-grade rod-shape drug crystals, the MCs-Gel exhibited a high drug loading but poor stability, precipitating in vitro and in vivo, the highest intratumoral residue but the least drug release, resulting in moderate tumor inhibition. In conclusion, this study clarifies the effect of the drug dispersion state and scale on the behavior of a thermo-sensitive hydrogel, indicating the advantage of the NCs-Gel system, and it provides a basis for the future design of the local delivery of hydrophobic anti-cancer agents. © The Royal Society of Chemistry 2015.