Diclofenac sodium was complexed with hydroxypropyl-β-cyclodextrin and physicochemical characterization was performed to evaluate the photo stability of diclofenac sodium. X-ray powder diffraction, UV-Vis analysis and Fourier Transform Infrared Spectroscopy were performed to examine the changes if any in the morphology and the configuration of the complex. The photo stability test followed by High Performance Liquid Chromatography analysis of the complex was determined. In vitro anti-inflammatory test using Human Red Blood Cell membrane stabilization method and in vivo analgesic activity studies in rat models to evaluate the therapeutic potential assessment of the complexed and norml diclofenac sodium. The test results have proved that the complexed diclofenac with hydroxypropyl-β-cyclodextrin enhance the photodegradation rate and resolute the optimal molar ratio of diclofenac to hydroxypropyl-β-cyclodextrin as 1:4. In vitro anti-inflammatory activity and in vivo analgesic activity results are indicates that the complexed form of diclofenac sodium with hydroxypropyl-β-cyclodextrin does not affects the therapeutic potentials of the drug.