The objective of this study was to prepare and evaluate terbutaline sulphate (TBS) bi-layer tablets for once-daily administration. The bi-layer tablets consisted of an immediate-release layer and a sustained-release layer containing 5 and 10 mg TBS, respectively. The sustained-release layer was developed by using Compritol(R) 888 ATO, Precirol(R) ATO 5, stearic acid, and tristearin, separately, as slowly eroding lipid matrices. A full 4x2(2) factorial design was employed for optimization of the sustained-release layer and to explore the effect of lipid type (X-1), drug-lipid ratio (X-2), and filler type (X-3) on the percentage drug released at 8, 12, and 24 h (Y-1, Y-2, and Y-3) as dependent variables. Sixteen TBS sustained-release matrices (F1-F16) were prepared by melt solid dispersion method. None of the prepared matrices achieved the targeted release profile. However, F2 that showed a relatively promising drug release was subjected to trial and error optimization for the filler composition to develop two optimized matrices (F17 and F18). F18 which consisted of drug-Compritol(R) 888 ATO at ratio (1: 6 w/w) and Avicel PH 101/dibasic calcium phosphate mixture of 2: 1 (w/w) was selected as sustained-release layer. TBS bilayer tablets were evaluated for their physical properties, in vitro drug release, effect of storage on drug content, and in vivo performance in rabbits. The bi-layer tablets showed acceptable physical properties and release characteristics. In vivo absorption in rabbits revealed initial high TBS plasma levels followed by sustained levels over 24 h compared to immediate-release tablets.