The solubilization efficiency of N-methyl pyrrolidone (NMP) has been determined and compared to that of ethanol and propylene glycol for 13 poorly soluble drugs. NMP is found to be a more efficient solubilizer for all the drugs studied. The solubility enhancement as high as about 800-fold is obtained in 20% v/v NMP solution as compared to water. The mechanism of drug solubilization by NMP has also been investigated. It is proposed that NMP enhances drug solubility by simultaneously acting as a cosolvent and a complexing agent. A mathematical model is used to estimate the drug solubility in NMP-water mixture, according to which the total solubility enhancement is a sum of the two effects. This model describes the experimental data well and is more accurate than other models. A large and uniform reduction in the surface tension of water as a function of NMP concentration demonstrates its cosolvent effect. The complexation is supported by the fact that it's strength is affected by the temperature and the polarity of the medium. A strong correlation exists between log K (ow) of the drugs and the cosolvency coefficients. The correlation between log K (ow) and the complexation coefficients is weak suggesting that factors such as molecular shape and aromaticity of the drug molecule are significant in determining the complexation strength. This has been confirmed by the absence of a significant complexation between NMP and linear drug-like solutes.