Composite sago starch-based system was developed and characterized with the aim to find an alternative to gelatin in the processing of pharmaceutical capsules. Dually modified (Hydrolyzed-Hydroxypropylated) sago starches were combined with κ-carrageenan (0.25, 0.5, 0.75, and 1%). The rheological properties of the proposed composite system were measured and compared with gelatin as reference material. Results show that combination of HHSS12 (Hydrolysed-hydroxypropylated sago starch at 12h) with 0.5% κ-carrageenan was comparable to gelatin rheological behavior in pharmaceutical capsule processing. The solution viscosity at 50 °C and sol-gel transition of the proposed composite system were comparable to those of gelatin. The viscoelastic moduli (G' and G") for the proposed system were lower than those of gelatin. These results illustrate that by manipulation of the constituents of sago starch-based composite system, a suitable alternative to gelatin can be produced with comparable properties and this could find potential application in pharmaceutical capsule industry.