An inclusion complex composed of progesterone (Prog) and hydroxypropyl-beta-cyclodextrin (HPbetaCD) was prepared by the spray-drying and freeze-drying methods. Prog alone and its inclusion complex with HPbetaCD were incorporated into chitosan by spray-drying and freeze-drying. The inclusion complex was characterized by IR and DSC. The inclusion complex was investigated in solution by phase solubility diagrams and stability constant was determined at pH 7.4 and at different temperatures (10, 25 and 37 degrees C) to obtain the thermodynamic parameters of inclusion. The results indicate that the Prog-HPbetaCD inclusion complex is more water soluble than Prog alone. Release data from all samples showed significant improvement of the dissolution rate of Prog and a controlled release is obtained in the presence of chitosan.