The aim of the study was to develop self-microemulsifying drug delivery system (SMEDDS) of a poorly water soluble drug, pioglitazone. Approximately 40% of new drug candidates have poor water solubility and the oral delivery of such drugs is frequently associated with implications of low bioavailability, high intra- and intersubject variability and lack of dose proportionality. Hydrophobic drugs can often be dissolved in microemulsion allowing them to be encapsulated in the form of fine globules, so that drug remains undissolved in the gut avoiding the dissolution step, which frequently limit the rate of absorption of hydrophobic drugs. Phase solubility studies were conducted for the maximum solubility of pioglitazone. Highest was found in Tween 80 (surfactant) polyethylene glycol 400 (cosurfactant) and cottonseed oil. Ternary phase diagrams were constructed to evaluate microemulsion regions. FTIR analysis was done for investigating the drug–excipient interactions. The mean globule size of SMEDDS was observed to be below 200nm for the optimized formulations and the zeta potential was negative. The dissolution of emulsion formulations was compared with commercial tablets; the results indicated that the rate of dissolution of developed formulations containing pioglitazone was 2 to 3 folds increased compared with that of commercial tablets. SEM studies were done for the shape and morphology of the globules. Thus, SMEDDS can be regarded as novel and commercially feasible alternative to the current pioglitazone formulations.