When sodium hydroxide dissolves in water is it a chemical or physical change?
My own feeling is that this is a chemical change.....but your teacher may think differently.
Chemical changes are characterized by the formation of new substances and the making and breaking of strong chemical bonds.
When caustic soda is dissolved in water, strong ionic bonds between sodium and hydroxide ions are disrupted, are broken, and strong bonds are formed between the sodium ions and the water molecules. The balance of bonds formed versus bonds broken lies in favour of bond formation in that the dissolution is quite exothermic:
Now this is an undergraduate treatment, not an A level treatment. If you are in high school, canvas your teacher's opinion, and adopt it.