Crystalline anhydrous drugs can get potentially transformed in to the hydrate form during manufacturing processes that involve water. To control the solid-state form of the drug it is important to understand the process of manipulating these transformations. The use of polymers to inhibit solid state transformations is an imperative concept in drug delivery. Recently tremendous investigation is going on using various polymers to prevent the anhydrate to hydrate transformation during manufacturing. The aim of this work was to investigate the influence of specific ratio of hydroxypropyl methylcellulose K 4 M on the phase transformation and release profile of carbamazepine. The surface topography of the crystal for assessing the crystal habit was done using scanning electron microscope, Fourier Transform Infrared Spectrophotometer and differential scanning calorimetry. Powder dissolution profile concluded that anhydrate exhibited significantly higher dissolutionrate. HPMC K4 M was found to inhibit the transformation of carbamazepine to carbamazepine dihydrate in the gel layer of hydrated tablets and in aqueous solutions. Upon exposure to aqueous medium, the anhydrateform rapidly converts to the dihydrate. However, premixing ofanhydrate with HPMC K4M in specific ratio, in the presence of water exhibited inhibition of the solution mediated phase transformation of carbamazepine anhydrate to dihydrate.