Diclofenac is one of the most widely prescribed non-steroidal anti-inflammatory drugs (NSAIDs). Use of diclofenac is associated with two major limitations; first, rare, but serious and sometimes fatal, gastrointestinal (GI) side-effects, including ulceration, and hemorrhage, especially in the elderly (1, 2), and second, poor water solubility. Pharmacosomes are amphiphilic lipid vesicular systems that have shown their potential in improving the bioavailability of poorly water soluble as well as poorly lipophilic drugs. Diclofenac is a poorly water soluble drug and also causes gastrointestinal toxicity. To improve the water solublity of diclofenac, its pharmacosomes (phospholipid complex) have been prepared and evaluated for physicochemical analysis. Diclofenac was complexed with phosphatidylcholine (80 %) in equimolar ratio, in the presence of dichloromethane, by the conventional solvent evaporation technique. Pharmacosomes thus prepared were evaluated for drug solubility, drug content, surface morphology (by scanning electron microscopy), phase transition behaviour (by differential scanning calorimetry), crystallinity (by X-ray powder diffraction) and in vitro dissolution. Pharmacosomes of diclofenac were found to be irregular or disc shaped with rough surfaces in SEM. Drug content was found to be 96.2 ± 1.1 %. DSC thermograms and XRPD data confirmed the formation of the phospholipid complex. Water solubility of the prepared complex was found to be 22.1 mg mL -1 as compared to 10.5 mg mL -1 of diclofenac. This improvement in water solubility in prepared pharmacosomes may result in improved dissolution and lower gastrointestinal toxicity. Pharmacosomes showed 87.8 % while the free diclofenac acid showed a total of only 60.4 % drug release at the end of 10 h of dissolution study.