Combined phase behavior, method of dilution, viscosity, dynamic light scattering, electrical conductance and spectroscopic probing techniques were employed in understanding the physicochemical properties of pseudo ternary microemulsion system 1-butyl-3-methyl imidazolium methanesulfonate ([bmim][MS]±water)/(Tween 20+n-pentanol)/n-heptane. Phase manifestation revealed that the area under the clear region depended on ionic liquid (IL)/water mole ratio. Thermodynamic and structural parameters for the formation of (IL+water)-in-oil μE system were evaluated employing the method of dilution at different [polar domain]/[Tween 20] mole ratio and temperature; the parameters depended on the composition of the polar domain. IL+water comprising μE behaved differently, compared to the conventional water-in-oil μE system, especially at higher mole fraction of IL. Both the size and viscosity increased with the increasing volume fraction of the dispersed phase (IL+water), while they decreased with increasing temperature. Although having IL, the μEs were less conducting due to the strong interaction between the IL cation and the oxyethylene groups of the surfactants. Formation of micelle like aggregates within the polar domain further suppressed the conductivity. Combined studies on the absorption and emission spectra of eosinY, along with the excited state lifetime and anisotropy measurements, revealed the existence of different states of IL+water in the polar domain.