Tenoxicam (TNX) is a non-steroidal anti-inflammatory drug (NSAID) used for the treatment of rheumatoid arthritis, osteoarthritis, ankylosing spondylitis, backache and pain. However, prolonged oral use of this drug is associated with gastrointestinal adverse events like peptic ulceration, thus necessitating its development as topical formulation that could obviate the adverse effects and improve patient compliance. The present study was aimed at development of microemulsion-based formulations of TNX for topical delivery at the affected site. The pseudoternary phase diagrams were developed and microemulsion formulations were prepared using Captex 300/oleic acid as oil, Tween 80 as surfactant and n-butanol/ethanol as co-surfactant. Optimized microemulsions were characterized for drug content, droplet size, viscosity, pH and zeta potential. The ex vivo permeation studies through Laca mice skin were performed using Franz diffusion cell assembly, and the permeation profile of the microemulsion formulation was compared with aqueous suspension of drug and drug incorporated in conventional cream. Microemulsion formulations of TNX showed significantly higher (p < 0.001) mean cumulative percent permeation values in comparison to conventional cream and suspension of drug. In vivo anti-arthritic and anti-inflammatory activity of the developed TNX formulations was evaluated using various inflammatory models such as air pouch model, xylene-induced ear edema, cotton pellet granuloma and carrageenan-induced inflammation. Microemulsion formulations were found to be superior in controlling inflammation as compared to conventional topical dosage forms and showed efficacy equivalent to oral formulation. Results suggest that the developed microemulsion formulations may be used for effective topical delivery of TNX to treat various inflammatory conditions.