Although aqueous dye lasers are much sought after, they have been of no practical use, as laser dyes show a strong tendency for aggregation in water, thus diminishing their optical output. Contributing towards this shortcoming, we studied the noncovalent interactions of two prominent laser dyes, namely, rhodamine 6G and rhodamine B, with a water soluble macrocyclic host, sulfobutylether-β-cyclodextrin (SBE βCD). Spectral changes in the absorption and fluorescence behavior of dyes in presence of the SBE βCD host indicated adequate complex formation between dye and host (K∼10 M ). A combination of various photophysical parameters evaluated from measurements such as Job plot, changes in the fluorescence lifetime/anisotropy values, and favorable thermodynamic parameters from isothermal titration calorimetric measurements adjudicated a 1 : 1 stoichiometric complex formation between dye and SBE βCD host. Consequently, SBE βCD prevents dye aggregation/adsorption and present rhodamine dyes in their monomeric forms with enhanced fluorescence yield and brightness. These vital parameters were utilized to optimize and demonstrate cost-effective supramolecular broad-band and narrow-band aqueous dye laser systems with improved lasing efficiencies (∼25 % higher for the SBE βCD : RhB system and ∼10 % higher for SBE βCD : Rh6G system), better beam profile, and enhanced durability compared to the respective dyes in optically matched ethanol solutions.