The objective of the present work was to investigate the inclusion behavior of bendamustine (BM) with β-cyclodextrin and its hydrophilic derivatives (HP-β-CD and Epi-β-CD) for the enhancement of aqueous solubility, dissolution and bioavailability. The supramolecular binary complexes were prepared by three different methods, viz. physical mixture (PM), kneading (KND) and co-evaporation (COE). Phase-solubility study revealed the higher solubilizing and complexing ability of polymerized cyclodextrin (Ks = 645 M(-1)) than parent cyclodextrin (Ks = 43 M(-1)) and chemically derived cyclodextrin (Ks = 100 M(-1)). Meanwhile, the solubility of BM was significantly enhanced in phosphate buffer of pH 6.8, which was 24.5 folds greater compared with the phosphate buffer pH 4.5 and four times greater than aqueous medium. The dissolution efficiency was found to be highest for BM: Epi-β-CD complex (87%) compared to BM: HP-β-CD complex (84%), BM: β-CD (79%) and pure drug (20%). In-vivo pharmacokinetic study revealed that the bioavailability of BM was enhanced 2.55 times on complexation with Epi-β-CD using KND method. The t1/2 of BM was increased from 34.2 min to approximately 75.7 min, allowing the absorption for longer time. The order of increase in solubility, dissolution and bioavailability of BM was KND > COE > PM > pure drug. Thus, the strategy of host-guest inclusion was very effective and could be successfully used in the development of suitable pharmaceutical dosage form with enhanced therapeutic activity.