The effect of surfactant chain lengths [sodium caprylate (C8), Tween 20 (C12), Tween 80 (C18)] and the molecular weight of block copolymers [Pluronic F68 and Pluronic F 127] were studied to determine the stability of the microemulsion and its effect on release kinetics from cyclosporine-loaded microemulsion-laden hydrogel contact lenses in this work. Globule size and dilution tests (transmittance) suggested that the stability of the microemulsion increases with increase in the carbon chain lengths of surfactants and the molecular weight of pluronics. The optical transmittance of direct drug-laden contact lenses [DL-100] was low due to the precipitation of hydrophobic drugs in the lenses, while in microemulsion-laden lenses, the transmittance was improved when stability of the microemulsion was achieved. The results of in vitro release kinetics revealed that drug release was sustained to a greater extent as the stability of microemulsion was improved as well. This was evident in batch PF127-T80, which showed sustained release for 15 days in comparison to batch DL-100, which showed release up to 7 days. An in vivo drug release study in rabbit tear fluid showed significant increase in mean residence time (MRT) and area under curve (AUC) with PF-127-T80 lenses (stable microemulsion) in comparison to PF-68-SC lenses (unstable microemulsion) and DL-100 lenses. This study revealed the correlation between the stability of microemulsion and the release kinetics of drugs from contact lenses. Thus, it was inferred that the stable microemulsion batches sustained the release of hydrophobic drugs, such as cyclosporine from contact lenses for an extended period of time without altering critical lens properties.