Inclusion complex between N-phenyl-1-naphthylamine (NPN) and β-cyclodextrin (β-CD) was studied by FT-IR, 1H and 2D NMR, XRD, FT-Raman, SEM and DSC techniques. The formation of 1:1 stoichiometric inclusion complex of NPN with β-CD was proposed based on the Nuclear magnetic resonance spectroscopy and Molecular docking study. The molecular encapsulation of host–guest inclusion complex based on simple chemosensor has high selectivity and sensitivity for the determination of Pd2+ ion. Host–guest inclusion complex as a spectroscopic probe is used for the detection of transition metal cation Pd2+. Coordination of this Pd2+ with (NPN/β-CD) inclusion complex exhibited a noticeable color change in the solution state it used for naked-eye detection.