Progesterone oral dose regimens are indicated for the treatment of luteal phase deficiency and estrogen dominance. The poor aqueous solubility of progesterone leads to erratic oral absorption, resulting in suboptimal or excessive plasma levels. Developing a formulation to enhance the solubility of progesterone in the gastrointestinal tract would be beneficial to decrease drug absorption variability and increase bioavailability. The solubility of progesterone at 400 mM sulfobutyl-ether-β-cyclodextrin (SBE-β-CD) concentration was ~7000-fold greater than its intrinsic solubility, aided by the formation of SBE-β-CD–progesterone complex. The complex was characterized using differential scanning colorimeter, Fourier-transform infrared (FTIR) and nuclear magnetic resonance (NMR) spectroscopy techniques. FTIR and NMR studies of the complex confirm the interaction between functional groups of SBE-β-CD and progesterone to form an inclusion complex. Molecular modeling studies demonstrated progesterone binding poses with four probable SBE-β-CD isomers and these results matched with NMR and FTIR data. The progesterone oral formulations were optimized by increasing the levels of SBE-β-CD in the formulation to prevent the displacement of progesterone from the complex by gastrointestinal contents. The oral bioavailability of progesterone in rats was increased 5-fold when administered with the optimized formulation compared to administration with progesterone API capsules. Studies demonstrated that the optimized formulation prevents precipitation of progesterone in the intestinal tract and increases progesterone oral bioavailability in rats.