The separation of morpholine from the aqueous effluent stream is carried out using an efficient hybrid extraction-distillation (HED) system using commercially viable solvents 2-ethyl hexanol and toluene, which makes heteroazeotrope with water. This paper investigated the tie-line, mutual solubility and VLE measurements, and thermodynamic modeling. On comparing the two solvents, 2-ethyl hexanol emerged as an appropriate extractant. The experimental tie-line data regressed by the NRTL model and a deviation of 0.8 indicates a good correlation between experimental and predicted data. Further, the process is designed, simulated, and optimization is performed by minimizing total annual cost (TAC) as the objective function. At extract/solvent to feed ratio S/F of 0.78 mol fraction, number of stages, NT of 28, 99.8% morpholine recovered in the extract phase with TAC of $23.3×104/y. Subsequently, the extract phase is fed to the heteroazeotropic distillation column to remove moisture followed by the final recovery column. Finally, a laboratory-scale experiment was conducted to verify the separation performance in the downscaled (3.5×50 cm) counter-current extraction column.