- The purpose of this study was to investigate the impact of oral cyclodextrin-based formulation on both the apparent solubility and intestinal permeability of lipophilic drugs. The apparent solubility of the lipophilic drug dexamethasone was measured in the presence of various HPβCD levels. The drug’s permeability was measured in the absence vs. presence of HPβCD in the rat intestinal perfusion model, and across Caco-2 cell monolayers. The role of the unstirred water layer (UWL) in dexamethasone’s absorption was studied, and a simplified mass-transport analysis was developed to describe the solubility-permeability interplay. The PAMPA permeability of dexamethasone was measured in the presence of various HPβCD levels, and the correlation with the theoretical predictions was evaluated. While the solubility of dexamethasone was greatly enhanced by the presence of HPβCD (K1∶1 = 2311 M−1), all experimental models showed that the drug’s permeability was significantly reduced following the cyclodextrin complexation. The UWL was found to have no impact on the absorption of dexamethasone. A mass transport analysis was employed to describe the solubility-permeability interplay. The model enabled excellent quantitative prediction of dexamethasone’s permeability as a function of the HPβCD level. This work demonstrates that when using cyclodextrins in solubility-enabling formulations, a tradeoff exists between solubility increase and permeability decrease that must not be overlooked. This tradeoff was found to be independent of the unstirred water layer. The transport model presented here can aid in striking the appropriate solubility-permeability balance in order to achieve optimal overall absorption.