A novel nanocrystal system of montelukast (MTK) was designed to improve the transdermal delivery, while ensuring chemical stability of the labile compound. MTK nanocrystal suspension was fabricated using acid-base neutralization and ultra-sonication technique and was characterized as follows: approximately 100 nm in size, globular shape, and amorphous state. The embedding of MTK nanocrystals into xanthan gum-based hydrogel caused little changes in the size, shape, and crystalline state of the nanocrystal. The in vitro drug release profile from the nanocrystal hydrogel was comparable to that of the conventional hydrogel because of the rapid dissolution pattern of the drug nanocrystals. The drug degradation under visible exposure (400–800 nm, 600,000 lux·h) was markedly reduced in case of nanocrystal hydrogel, yielding only 30% and 50% amount of cis-isomer and sulfoxide as the major degradation products, as compared to those of drug alkaline solution. Moreover, there was no marked pharmacokinetic difference between the nanocrystal and the conventional hydrogels, exhibiting equivalent extent and rate of drug absorption after topical administration in rats. Therefore, this novel nanocrystal system can be a potent tool for transdermal delivery of MTK in the treatment of chronic asthma or seasonal allergies, with better patient compliance, especially in children and elderly.