Drug labeling contains an ‘INDICATIONS AND USAGE’ that provides vital information to support clinical decision making and regulatory management. Effective extraction of drug indication information from free-text based resources could facilitate drug repositioning projects and help collect real-world evidence in support of secondary use of approved medicines. To enable AI-powered language models for the extraction of drug indication information, we used manual reading and curation to develop a Drug Indication Classification and Encyclopedia (DICE) based on FDA approved human prescription drug labeling. A DICE scheme with 7,231 sentences categorized into five classes (indications, contradictions, side effects, usage instructions, and clinical observations) was developed. To further elucidate the utility of the DICE, we developed nine different AI-based classifiers for the prediction of indications based on the developed DICE to comprehensively assess their performance. We found that the transformer-based language models yielded an average MCC of 0.887, outperforming the word embedding-based Bidirectional long short-term memory (BiLSTM) models (0.862) with a 2.82% improvement on the test set. The best classifiers were also used to extract drug indication information in DrugBank and achieved a high enrichment rate (>0.930) for this task. We found that domain-specific training could provide more explainable models without performance sacrifices and better generalization for external validation datasets. Altogether, the proposed DICE could be a standard resource for the development and evaluation of task-specific AI-powered, natural language processing (NLP) models.