The purpose of this study was to formulate topical microemulsion gel of karanja oil suitable for topical delivery. Karanja oil microemulsion system with Tween 80 as surfactant, PEG 400 as cosurfactant and karanja oil as oil was developed for topical delivery. Pseudo-ternary phase diagrams were constructed to identify the microemulsion region and a suitable composition was identified to formulate the microemulsion. Single isotropic region, which is considered as an o/w microemulsion, was found in the pseudo-ternary phase diagrams developed at various Tween 80 and PEG 400 ratios using phase titration method. The developed microemulsion was characterized for clearity, zeta potential, viscosity, globule size. Centrifugation studies were carried out to confirm the stability of the developed formulation. The formulation was thickened with a gelling agent, Carbopol 940, to yield a gel with desirable properties facilitating the topical application. The developed microemulsion based gel was characterized for pH, spreadability, viscosity. Optimized microemulsion based gel formulation was found to exhibit significant antifungal activity against Candida albicans species. Thus the present study indicates that developed topical microemulsion gel of karanja oil is effective for treatment of fungal infection.