The commercially available rebamipide ophthalmic suspension (CA-REB) was approved for clinical use in patients with dry eye; however, the residence time on the ocular surface for the traditional formulations is short, since the drug is removed from the ocular surface through the nasolacrimal duct. In this study, we designed a novel sustained-release drug delivery system (DDS) for dry eye therapy by rebamipide nanoparticles. The rebamipide solid nanoparticle-based ophthalmic formulation (REB-NPs) was prepared by a bead mill using additives (2-hydroxypropyl-β-cyclodextrin and methylcellulose) and a gel base (carbopol). The rebamipide particles formed are ellipsoid, with a particle size in the range of 40–200 nm. The rebamipide in the REB-NPs applied to eyelids was delivered into the lacrimal fluid through the meibomian glands, and sustained drug release was observed in comparison with CA-REB. Moreover, the REB-NPs increased the mucin levels in the lacrimal fluid and healed tear film breakup levels in an N-acetylcysteine-treated rabbit model. The information about this novel DDS route and creation of a nano-formulation can be used to design further studies aimed at therapy for dry eye.