The application of docosahexaenoic acid (DHA) to nonfat food is often challenging due to its poor bioavailability and susceptibility to oxidative rancidity. The aim of this study was to investigate how manufacturing variables, such as degree of substitution (DS) of oleic acid-modified chitosan and sub-ambient temperature treatment, affected the physicochemical properties of oleic acid-modified chitosan/milk protein nanoparticle (OPN) and reduction in oxidative rancidity. Oleic acid-modified chitosan with various DS ranging from 0 to 7.4% were prepared using a carbodiimide coupling method. OPN was manufactured at various sub-ambient temperature from 5 to 25°C. The morphology and size of OPN were investigated using atomic force microscopy and particle size analyzer, respectively. Encapsulation efficiency, oxidative rancidity, and off-flavor compounds of DHA were determined by high performance liquid chromatography, peroxide value, and gas chromatography/mass spectrometry, respectively. Globular shaped particles with the size of ~190 nm were observed indicating the successful formation of OPN. As DS increased from 0 to 7.4%, a significant (P < 0.05) increase in the size of OPN and encapsulation efficiency of DHA was observed. During storage, the peroxide value for OPN containing DHA was significantly (P < 0.05) decreased with an increase in DS. A decrease in sub-ambient temperature from 25 to 5°C resulted in a significant (P < 0.05) decrease in the size of OPN and increase in the encapsulation efficiency of DHA. The peroxide value for OPN containing DHA was significantly (P < 0.05) lower in comparison to free DHA although it was not significantly affected by sub-ambient temperature treatment. No significant (P < 0.05) off-flavor developments were observed in OPN containing DHA while free DHA exhibited a significant (P < 0.05) increase in off-flavor development during storage. In conclusions, DS and sub-ambient temperature treatment were crucial factors affecting the physicochemical properties of OPN and oxidative stability.