- The purpose of this work was to investigate key factors dictating the success/failure of cyclodextrin-based solubility-enabling formulations for oral delivery of low-solubility drugs. We have studied the solubility, the permeability, and the solubility–permeability interplay, of the highly lipophilic drug danazol, formulated with different levels (8.5, 10, 20, and 30%) of the commonly used hydroxypropyl-β-cyclodextrin (HPβCD), accounting for the biorelevant solubilization of the drug along the gastrointestinal tract (GIT), the unstirred water layer (UWL) adjacent to the GI membrane, and the overall absorption. HPβCD significantly increased danazol solubility, and decreased the drugs’ permeability, in a concentration-dependent manner. These Peff results were in good correlation (R2 = 0.977) to literature rat AUC data of the same formulations. Unlike vehicle without HPβCD, formulations containing 8.5% HPβCD and above were shown to successfully dissolve the drug dose during the entire biorelevant dissolution experiment. We conclude that CD-based solubility-enabling formulations should contain the minimal amount of CD sufficient to dissolve the drug dose throughout the GIT, and not more than that; excess CD does not provide solubility gain but causes further permeability loss, and the overall absorption is then impaired. Moreover, a significant UWL effect was revealed in danazol intestinal permeability, and accounting for this effect allowed an excellent prediction of the solubility–permeability trade-off vs % HPβCD. Overall, this work assessed the contribution of each individual step of the absorption cascade to the success/failure of HPβCD-based formulation, allowing a more mechanistic development process of better solubility-enabling formulations.