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Objective: Microemulsion is a promising drug delivery vehicle for lipophilic drugs but its acceptability for topical application is limited to its very low viscosity. The aim of the present study was to develop and characterize lipid microemulsion hydrogel as a topical drug carrier for phenytoin.Methods: Lipid oil-in-water (O/W) emulsions were formulated from palm kernel oil (PKO), coconut kernel oil (CKO) and soybean oil (SBO), and their blends using phase inversion temperature method. Stable nano-sized microemulsions were identified and formulated into phenytoin loaded hydrogels. The physicochemical properties of the formulations were evaluated in term of emulsion stability index, droplet size, zeta potential, pH, and rheological properties. The efficacy of in vitro drug release of phenytoin was further evaluated using Franz diffusion cells.Results: Stability study revealed that ten lipid emulsions mixing with surfactant Tween 80 at an oil-to-surfactant ratio of 1:9 having 100% emulsion stability indices. Among these, two emulsions (F6 and F21) were identified as the most stable nano-sized microemulsions with clear and transparent appearances; mean droplet size maintained within 100 nm (11–16 nm) as per stability study. Rheological data showed that all phenytoin is loaded hydrogels exhibited non-Newtonian and shear-thinning flow behavior, with high yield stress of a 10.3–18.8 Pa. The in vitro release profiles followed the first-order kinetic model, with R2>0.95, where F21 demonstrated the highest release rate, with 93.12% drug released in 12 h.Conclusion: These findings concluded that CKO/SBO blend microemulsion hydrogel has the highest potential for topical phenytoin delivery.