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An oral insulin delivery system based on methyl-β-cyclodextrin (MCD) complexed insulin encapsulated polymethacrylic acid (PMAA) hydrogel microparticles was evaluated in this investigation. Poly(methacrylic acid)-chitosan-polyethylene glycol (PCP) microparticles were prepared by ionic gelation method. The insulin–MCD (IC) complex prepared was characterized by fluorescence spectroscopic and isothermal titration micro-calorimeteric (ITC) methods. MCD complexed insulin was encapsulated onto PCP microparticles by diffusion filling method. Loading and release properties of the complexed insulin from microparticles were evaluated under in vitro conditions. The effect of MCD complexation on the permeability of insulin was studied using Caco 2 cell monolayers and excised intestinal tissue with an Ussing chamber set-up. In vivo experiments were carried on streptozotocin induced diabetic rats to evaluate the efficacy of MCD complexed insulin encapsulated PCP microparticles to deliver insulin by the oral route.IC complex formation was established by fluorescence and ITC investigations. Insulin loading and release properties from the hydrogel matrix was rather unaffected by the MCD complexation. However MCD complexation was effective in enhancing insulin transport across Caco 2 cell monolayers, when applied in combination with the PMAA hydrogel system. Both insulin and MCD complexed insulin encapsulated PCP microparticles were effective in reducing blood glucose level in diabetic animal models. Cyclodextrin complexed insulin encapsulated hydrogel microparticles appear to be an interesting candidate for oral delivery of insulin.