The main objective of the study was to develop a microemulsion (ME) formulation of griseofulvin for the treatment of dermatophytosis (Indian Patent Application 208/DEL/2009). The oil phase was selected on the basis of drug solubility whereas the surfactant and cosurfactant were screened on the basis of their oil solubilizing capacity as well as their efficiency to form ME from pseudo-ternary phase diagrams. The influence of surfactant and cosurfactant mass ratio (Smix) on the ME formation and its permeation through male Laca mice skin was studied. The optimized formulation (ME V) consisting of 0.2% (w/w) griseofulvin, 5% (w/w) oleic acid, 40% (w/w) Smix (1:1, Tween 80 and ethanol) possessed globule size of 12.21nm, polydispersity index of 0.109 and zeta potential value of −0.139mV. ME V exhibited 7, 5 and almost 3-fold higher drug permeation as compared to aqueous suspension, oily solution and conventional cream respectively. Besides this the formulation was also evaluated for drug content, pH, stability, dermatopharmacokinetics and antifungal activity against Microsporum canis using guinea pig model for dermatophytosis. Treatment of guinea pigs with ME V resulted in a complete clinical and mycological cure in 7 days. The formulation was observed to be non-sensitizing, histopathologically safe, and stable at 5±3°C, 25±2°C and 40±2°C for a period of six months.