Iloperidone, a second-generation USFDA approved antipsychotic and BCS class II drug shows poor oral bioavailability of 28%. The present research deals with optimization of transnasal nanoemulsions of Iloperidone using Design Expert (Version 11) and further surface functionalization with chitosan for potentiating nose to brain delivery. Chitosan functionalized transnasal Iloperidone nanoemulsions were developed using oleic acid, charge inducer, Tween 80, TranscutolHP and chitosan using ultrasonication technique and evaluated. Droplet size, polydispersity index and zeta potential of Iloperidone nanoemulsions was found to be 173 ± 0.5nm, 0.413 ± 0.2 and - 22.5 ± 0.1mV while that of chitosan functionalized Iloperidone nanoemulsions was 146.4 ± 0.5nm, 0.291 ± 0.02 and + 23.6 ± 0.3mV respectively. Ninhydrin assay, TEM and FTIR studies confirmed surface functionalization of Iloperidone nanoemulsion droplets with chitosan. In vitro release of Iloperidone from nanoemulsions and chitosan functionalized nanoemulsions was 90.41 ± 2.1% and 72.02 ± 0.21% while ex vivo permeation of Iloperidone across goat nasal mucosa was 1270.58 ± 0.023μg/cm2 and 1096.13 ± 0.043μg/cm2 respectively at the end of 8h. Studies in RPMI 2650 nasal and Neuro2A brain cell line lines indicated safety of chitosan functionalized transnasal Iloperidone nanoemulsions. Studies in Wistar rats showed increased cataleptic effects, reduced cognitive impairment and anxiety-related behaviour with greater brain accumulation indicating promising potential of this approach in nose to brain drug delivery.