The aim of this study was to develop and validate a simple, sensitive, precise and cost-effective one-level agar diffusion (5+1) bioassay for estimation of potency and bioactivity of Cephalexin in pharmaceutical preparation which has not yet been reported in any pharmacopoeia. Escherichia coli MTCC-443 was selected as the most significant strain against Cephalexin. Bioassay was optimized by investigating several factors such as buffer pH, inoculums concentration and reference standard concentration. Identification of Cephalexin in commercial sample Cephadex tablet was done by FTIR spectroscopy. Mean potency recovery value for Cephalexin in Cephalexin tablet was estimated as 100.2%. A validated bioassay method showed linearity (r 2 =0.999), precision (Intraday RSD=1.09%, and Interday RSD=0.94%) and accuracy (99.53%, RSD=0.306%). Bioassay was correlated wi th HPLC using same sample and estimated potencies were 100.2% and 99.25%, respectively. Results show that bioassay is a suitable method for estimation of potency and bioactivity of Cephalexin pharmaceutical preparations.