We study various spectral properties of the Seidel matrix $S$ of a connected chain graph. We prove that $-1$ is always an eigenvalue of $S$ and all other eigenvalues of $S$ can have multiplicity at most two. We obtain the multiplicity of the Seidel eigenvalue $-1$, minimum number of distinct eigenvalues, eigenvalue bounds, characteristic polynomial, lower and upper bounds of Seidel energy of a chain graph. It is also shown that the energy bounds obtained here work better than the bounds conjectured by Haemers. We also obtain the minimal Seidel energy for some special chain graphs of order $n$. We also give a number of open problems.