Tolbutamide (TBM) was found to form an inclusion complex with beta cyclodextrin (beta-CD) in solution and in solid state. Inclusion complex formation between tolbutamide and beta-cyclodextrin in aqueous solution was studied by phase solubility and spectral shift methods. The apparent stability constant Ks calculated by these techniques, in water, were estimated as 195.7 and 236.5 M(-1), respectively. The phase solubility studies revealed a B(S)-type diagram with an inclusion complex of 1:2 molar ratio. The solid inclusion complexes of TBM and beta-CD were prepared at a molar ratio of 1:2 by kneading, coprecipitation, freeze-drying, and spray-drying methods. In addition, the physical mixture was prepared. Characterization of TBM: beta-CD inclusion was performed using differential scanning calorimetry (DSC), Raman spectroscopy, and X-ray diffractometry and by application of a so-called ether wash method. All the inclusion systems investigated led to a significant improvement in the dissolution over free TBM, and the dissolution rate of the active material was observed to be independent of the preparation method.