The objective of this research was to improve the aqueous solubility, dissolution rate and, consequently, bioavailability of diacerein, along with avoiding its side effect of diarrhea, by complexation with beta-cyclodextrin (beta-CD) and HP-beta-cyclodextrin (HP-beta-CD). Phase solubility curve was classified as an A(N) type for both the CDs, which indicated formation of complex of diacerein with beta-CD and HP-beta-CD in 1:1 stoichiometry and demonstrating that both CDs are proportionally less effective at higher concentrations. The complexes were prepared by kneading method and were evaluated to study the effect of complexation on aqueous solubility and rate of dissolution in phosphate buffer (pH 6.8). Based on the dissolution profile HP-beta-CD was selected for preparing fast disintegrating tablet of diacerein which was compared with marketed formulation (MF-J). The HP-beta-CD complex was probed for Fourier transform infrared spectroscopy, differential scanning calorimetry, and powder X-ray diffraction studies which evidenced stable complex formation and increase in amorphousness of diacerein in complex. In brief, the characterization studies confirmed the inclusion of diacerein within the non-polar cavity of HP-beta-CD. HP-beta-CD complex showed improved in vitro drug release profile compared to pure drug and similar to that of marketed formulation respectively.