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Biodegradable nanoparticles loaded with insulin–phospholipid complex were prepared by a novel reverse micelle–solvent evaporation method, in which soybean phosphatidylcholine (SPC) was employed to improve the liposolubility of insulin, and biodegradable polymers as carrier materials to control drug release. Solubilization study, IR and X-ray diffraction analysis were employed to prove the complex formation. The effects of key parameters such as polymer/SPC weight ratio, organic phase and polymer type on the properties of the nanoparticles were investigated. Spherical particles of 200 nm mean diameter and a narrow size distribution were obtained under optimal conditions. The drug entrapment efficiency was up to 90%. The in vitro drug release was characterized by an initial burst and subsequent delayed release in both pH 6.8 and pH 1.2 dissolution mediums. The specific modality of drug release, i.e., free or SPC–combined, was investigated in the aid of ultracentrifugation and ultrafiltration methods. The influence of polymer type on the drug release was also discussed. The pharmacological effects of the nanoparticles made of PLGA 50/50 (Av.Mw 9500) were further evaluated to confirm their potential suitability for oral delivery. Intragastric administration of the 20 IU/kg nanoparticles reduced fasting plasma glucose levels to 57.4% within the first 8 h of administration and this continued for 12 h. PK/PD analysis indicated that 7.7% of oral bioavailability relative to subcutaneous injection was obtained.