The objective of this study was to enhance the solubility, dissolution rate, and oral bioavailability of a very poorly water-soluble anti-fungal agent, ketoconazole (KET), by inclusion complexation with a highly-soluble cyclodextrin derivative, hydroxypropyl-beta cyclodextrin (HP-beta-CD). Two groups of tablets containing KET alone and KET:HP-beta-CD (1:2) kneaded product (KP) including magnesium stearate and lactopress (anhydrous and spray-dried) as excipients were prepared by direct compression method. After the characterization studies, the in vitro dissolution studies of these tablets in simulated gastric fluid (SGF) and simulated intestinal fluid (SIF) were carried out. To evaluate the in vivo bioavailability, the tablets were administered orally to rabbits and drug levels in serum were determined by HPLC. Tablets containing the cyclodextrin complex showed a higher in vitro dissolution rate and bioavailability compared to the tablets containing KET alone.