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Background: Povidone-iodine is used as a cost-effective broad-spectrum antiseptic in the prophylaxis and treatment of certain ocular infections. In this study, the stability, ophthalmic irritation potential and antibacterial efficacy of an extemporaneous povidone-iodine preparation was determined using established ex vivo and in vitro assays. Methods: Extemporaneous iodine was prepared by simple dilution in normal saline. Preparation stability was evaluated by monitoring concentration and pH. Ocular safety was determined using the bovine cornea opacity and permeability assay. Efficacy was assessed by determining the minimum inhibitory and minimum bactericidal concentration of the preparation on Staphylococcus aureus and Pseudomonas aeruginosa. Results: Diluted povidone-iodine maintained its stability over the 28-day evaluation. The formulation caused mild ocular irritation at the lowest prepared concentration (0.5 per cent w/v), with irritation noticeably increased at higher concentrations. The preparation showed minimum bactericidal and inhibitory concentrations of 0.078 and 0.3 per cent w/v on S. aureus and P. aeruginosa, respectively. Conclusions: This study confirms the stability and broad-spectrum antibacterial efficacy of povidone-iodine, while addressing the ocular irritation potential of this chemical.