Acyclovir, a popular antiviral drug, is associated with the problems of poor water solubility, low bioavailability (15-30%), low permeability (across the gastro intestinal membrane) and short half-life (3 hours) leading to high dosage frequency which in turn may cause adverse effects. Therefore, with the objective of the improvement in solubility (and dissolution also) and gastro intestinal permeability (which in turn is expected to improve the bioavailability) of acyclovir, the acyclovir- β-cyclodextrin (β-CD) complexes were prepared and characterized. The inclusion complexes of acyclovir were prepared with β-CD (with or without the presence of hydrophilic excipients namely polyvinyl pyrollidone K-30 and nicotinamide) using the kneading method. The prepared complexes were characterized for various physicochemical properties, FTIR, DSC, XRPD, in vitro release and ex vivo permeation study. The effect of water soluble excipients (PVP K- 30 and nicotinamide) on the performance of acyclovir- β-CD inclusion complexes was also studied. FTIR, DSC and XRPD data confirmed the formation of inclusion complexes. The DSC explained and correlated the change in the endothermic peaks with the complexation and the solubility improvement. This study revealed that FK6 (Drug+β-CD+PVP K- 30 1.5%+ nicotinamide-14mM) and FK4 (Drug+β-CD+nicotinamide-14mM) ratio showed highest increase in solubility as compared to that of PVP K-30. The effect of two excipients (PVP K-30 and nicotinamide) was investigated on the solubility, dissolution and permeability of acyclovir. Nicotinamide was found to be more effective and promising water soluble excipients for the preparation of β-CD complexes as compared to PVP K-30.