Niosomes or non-ionic surfactants vesicles are microscopic lamellar structures formed on the admixture of a non-ionic surfactant, cholesterol and stearylamine with subsequent hydration in aqueous media. The delivery of drugs by “vesicular drug delivery system" such as niosomes provides several important advantages over conventional drug therapy. Diacerein is an Interleukin-1 inhibitor and it is highly effective in relieving the symptoms of osteoarthritis. Diacerein, in contrast to NSAIDs, are potent inhibitor of IL-1 beta induced nitric oxide production by chondrocytes and cartilage, without reducing prostaglandin E2 production. The main objective of this study was to design suitable niosome-encapsulated drug delivery for anti-inflammatory drugs like Diacerein and evaluate the vesicle size, entrapment efficiency, in vitro release and physical stability of the system. Non-ionic surfactants used were Tween (40&60), cholesterol and stearylamine in molar ratio 1:1:0.1. The niosomes were prepared by thin film hydration method. The higher entrapment efficiency was observed with niosome (F11) prepared from tween 60, cholesterol and 2.5 min sonication. The release pattern shown by these formulations were first order & Higuchi diffusion controlled mechanism. The physical stability study show that niosomal preparation stored at refrigerated temperature for 60 days show maximum drug retained compare to room temperature and elevated temperature conditions. Finding of all this investigation conclusively demonstrate prolongation of drug release at a constant and controlled rate after niosomal encapsulation of Diacerein.