The objective of the present study was to develop chitosan-based mucoadhesive microspheres of clarithromycin to provide prolonged contact time for drug delivery of antibiotics to treat stomach ulcers. Microspheres based mucoadhesive formulation were extensively evaluated and characterized for in vitro performance followed by investigation of in vivo pharmacokinetics in rats. Microspheres were prepared by emulsification technique using glutaraldehyde as a crosslinking agent. Formulation conditions were optimized for percent drug entrapment and mucoadhesion, by varying different formulation and process parameters like drug to polymer ratio, concentration of crosslinking agent and time of crosslinking. Prepared microspheres were evaluated extensively for particle size, percent drug entrapment, swelling kinetics, in vitro mucoadhesion using rat stomach membrane and in vitro drug release studies. In vitro permeation studies across rat stomach membrane were carried out to determine diffusion parameters and drug retention in the stomach membrane of the formulation and the plain drug. Finally in vivo performance of microsphere formulation in comparison to plain drug was evaluated by pharmacokinetic studies in albino rats. Drug entrapment upto 74% was obtained. Swelling studies indicated that with an increase in cross-linking, the swelling ability decreased. The in vitro drug release and in vitro mucoadhesion studies showed a dependence on the extent of cross-linking and concentration of chitosan. Extent of cross-linking exhibited an inverse relation to drug release rate as well as mucoadhesion, whereas polymer concentration exhibited an inverse correlation with drug release while linear relationship with mucoadhesion (up to 86%). In vitro permeation studies across stomach tissue showed higher accumulation of drug in the stomach tissue with microspheres formulation as compared to that of free drug. This is evident from higher value of K (partition coefficient) and Qm/Csf values for microspheres (68.34 and 106.42X10(3), respectively) as compared to that of free drug (1.86 and 173.00, respectively). These findings when analyzed showed an increase in the bioavailability of clarithromycin from microsphere formulation as compared to plain drug suspension in vivo, with AUC 0-->alpha being 91.7 (microg h/ml)and 24.9 (microg h/ml) respectively. Results of the study demonstrated good mucoadhesion of the microspheres with the stomach mucosa as well as higher accumulation of drug in the stomach membrane. Microspheres also exhibited sustained release of drug. Thus chitosan microspheres appear, technically, promising mucoadhesive drug delivery systems for delivering clarithromycin to treat stomach ulcers.