The interaction of Ketoconazole with three kinds of cyclodextrins, β-, ɣ- and dimethyl β-cyclodextrin in aqueous solution and solid state was investigated to improve solubility and dissolution rate of the drug. For β- and dimethyl-ß-cyclodextrin, drug solubility increased linearly as a function of cyclodextrin concentration and the solubility curve could be classified as Higuchi A_L type which indicated the formation of soluble complexes. Complexation with y-cyclodextrin, however, yielded a B_s type solubility curve. The solid cormplexes in all cases were obtained in a molar ratio of 1:1. The inclusion complexes of the drug with the three Cyclodextrins were investigated using DSC and powder X-ray diffractometry and their dissolution behaviour were examined The dissolution rate of Ketoconazole-dimethyl-β-cyclodextrin complex was significantly faster than other complexes due to its high aqueous solubility and amorphous structure. It was concluded that cyclodextrins may be used to enhance the solubility and dissolution rate of Ketoconazole in water.