Cyclosporin A (CyA) is an immunosuppressive drug used topically to treat ocular inflammatory disorder such as dry eye disease (DES). It is a lipophilic cyclic peptide with molecular weight of 1202.6 Da. The aim of this study was to develop surfactant free aqueous 0.2% (w/v) CyA eye drops where the drug is present in an aqueous vehicle containing CyA/cyclodextrin (CyA/CD) nanoparticles and then do three-month toxicological testing in rabbits. Five formulations of different CD concentrations were studied, all of them contained 12.5% (w/v) of α-cyclodextrin (αCD) and various amounts of γ-cyclodextrin (γCD) (ranging from 0 to 12.5% w/v). αCD was used to solubilize the drug and γCD to promote formation of complex aggregates. CyA/CD complex aggregates were formed in all the formulations tested. However, the formulation containing 12.5% (w/v) αCD and 12.5% (w/v) γCD created more CyA/CD nanoparticles of suitable size and was therefore tested in vivo. The eye drops did not cause ocular irritation or toxic side effects upon topical administration to rabbits once or twice a day for three months.