Cyclodextrins (CD) form inclusion complexes with many drug molecules. The complexed drugs have increased bioabsorption in in vivo system. We have attempted to complex insulin with P-Cyclodextrin (BCD) and encapsulate in the chitosan/ calcium alginate matrix. For drug release studies insulin complexed with BCD for 20 min and that complexed with BCD for 150 min have been used for encapsulation in the chitosan/calcium alginate matrix. The two matrices seem to have different drug release profiles in simulated intestinal medium (pH 7.4) It appears that drug release from the 20-min BCD complexed system encapsulated in the chitosan/calcium alginate matrix begins only after an hour, where, being released from the 150-min BCD complexed system it begins in the first hour itself. Also, aggregation of the insulin molecules seems to be reduced by the complexation of the drug with BCD. Another noticeable fact is the change in the loading character, which is found to be inversely related to the concentration of BCD when it is above the stoichiometric equivalent of the drug. In an attempt to increase the payload of the drug in the matrix, the pH of the processing medium consisting of calcium chloride and chitosan is varied. It is found that the encapsulation efficiency increases as the pH is decreased from 6.0 to 4.0. Another way of increasing the loading is studied by decreasing the concentration gradient of insulin in the processing alginate solution and the crosslinking medium consisting of chitosan/calcium chloride. Preliminary animal studies on rabbits seem to be promising. (C) 2000 John Wiley & Sons, Inc.