The aim of the present study was to design microbeads by using nanocomposite clays (Optigel (OPT) and Laponite (LAP)) and polymers (sodium alginate (SA) and chitosan (CS)) for controlled release of diclofenac sodium (DS). Microbeads were prepared by ionotropic gelation technique using three different combinations: DS-OPT-SA, DS-LAP-SA and DS-LAP-CS microbeads. Drug-excipient compatibility was assessed by FTIR and DSC. The size distribution, swelling behavior, drug entrapment efficiency, surface morphology and in vitro drug release were investigated. Optimized formulation was assessed for pharmacokinetics, in vivo anti-inflammatory potential and ulcer induction activities. Formulated microbeads possess excellent mechanical and structural properties. High drug loading and good in vitro controlled drug release were observed with DS-OPT-SA clay and polymer combination. Pharmacokinetics study of optimized DS-OPT-SA microbeads confirmed the prolonged drug release in rats. DS-OPT-SA microbead formulation showed longer anti-inflammatory effect in rats when compared to pure drug. Ulcer induction studies revealed that DS-OPT-SA microbeads were found to be safe even at higher doses without exhibiting any signs of gastric mucosal damage.