The present investigation aimed to develop as well as optimize microsponge containing erlotinib hydrochloride (ETB) that was composed of ethyl cellulose (EC) and pectin. The water solubility and enzymatic susceptibility make it easier to fabricate the microsponge formulation. The ETB loaded microsponge was manufactured using quasi-emulsion solvent diffusion process. By this technique, organic solution of the primary component is emulsified with stabilizing agents that are soluble in water. To design the formation of the microsponge, 32 factorial design was implemented. It was investigated how the response variables like particle dimension, entrapment efficiency, ETB diffusion at 12 h were influenced by independent variables such as rotation speed and the pectin to ethyl cellulose ratio. The optimal microsponge formulation loaded with ETB (F0) composed of 1:2.8 ratio of pectin to ethyl cellulose (EC) with stirring rate at 478 rpm. Particle dimension, entrapment efficiency, and ETB release at 12 h from optimized formulation were shown 104.89 ± 0.62 nm, 82.36 ± 2.85 %, and 85.49 ± 1.84 % respectively. The In-vivo pharmacokinetic study conducted on rabbit model shows a significant improvement in bioavailability. The optimized microsponge formulation has been found to have a higher Cmax than the ETB aqueous suspension. The stability of the formulation has been determined by the accelerated stability study of optimized microsponge formulation. This study indicated that the optimized formulation retained its stability even after 90days. In general, the present investigation demonstrated that drug loaded microsponge based formulation is a suitable method to improve the therapeutic efficacy and bioavailability of ETB.