The influence of natural β-cyclodextrin and its hydrophilic derivatives (HPβCd and SBE7βCd) on the in vitro dissolution rate, in vivo absorption and oral bioavailability of a poorly water soluble anti-inflammatory agent, valdecoxib (VALD) was studied. Equimolar drug–cyclodextrin solid complexes were prepared by kneading and coevaporation methods and characterized by infrared spectroscopy, differential scanning calorimetry, X-ray diffraction. In the liquid state, the cyclodextrin complexes were studied using phase solubility analysis, 1H nuclear magnetic resonance and circular dichroism spectroscopy. Drug solubility and dissolution rate in distilled water were notably improved by employing the βCds. The DP 15 (i.e. percent of dissolved VALD at 15 min) was 10.5% for the pure drug and 50, 91 and 93% for VALD-βCd, VALD-HPβCd and VALD-SBE7βCd complexes, respectively. Moreover, it was found that in the, the cyclodextrin complexes of drug showed significant improvement in the anti-inflammatory activity.