The present study tests the hypothesis that layer-by-layer (LbL) nanoassembly of thin polyelectrolyte films on insulin particles provides sustained release of the drug after pulmonary delivery. LbL insulin microparticles were formulated using cationic and anionic polyelectrolytes. The microparticles were characterized for particle size, particle morphology, zeta potential and in vitro release. The pharmacokinetics and pharmacodynamics of drug were assessed by measuring serum insulin and glucose levels after intrapulmonary administration in rats. Bronchoalveolar lavage (BAL) and evans blue (EB) extravasation studies were performed to investigate the cellular or biochemical changes in the lungs caused by formulation administration. The mass median aerodynamic diameter (MMAD) of the insulin microparticles was 2.7 μm. Confocal image of the formulation particles confirmed the polyelectrolyte deposition around the insulin particles. Zeta potential measurements showed that there was charge reversal after each layering. Pulmonary administered LbL insulin formulation resulted in sustained serum insulin levels and concomitant decrease in serum glucose levels. The BAL and EB extravasation studies showed that the LbL insulin formulation did not elicit significant increase in marker enzymes activities compared to control group. These results demonstrate that the sustained release of insulin could be achieved using LbL nanoassembly around the insulin particles.