The inclusion complexes of poorly water-soluble cephalosporin, cefuroxime axetil (CFA), were prepared withβ-cyclodextrin (βCD) with or without addition of L-arginine (ARG) to improve its physicochemical properties. We also investigated the effect of ARG on complexation efficiency (CE) ofβCD towards CFA in an aqueous medium through phase solubility behaviour according to Higuchi and Connors. Although phase solubility studies showed AL (linear) type of solubility curve in presence and absence of ARG, the CE and association constant (Ks) ofβCD towards CFA were significantly promoted in presence of ARG, justifying its use as a ternary component. The solid systems of CFA withβCD were obtained by spray drying technique with or without incorporation of ARG and characterized by differential scanning ca-lorimetry (DSC), X-ray powder diffractometry (XRPD), scanning electron microscopy (SEM), and sa-turation solubility and dissolution studies. The molecular modeling studies provided a better insight into geometry and inclusion mode of CFA insideβCD cavity. The solubility and dissolution rate of CFA were significantly improved upon complexation withβCD as compared to CFA alone. However, ternary system incorporated with ARG performed better than binary system in physicochemical evaluation. In conclu-sion, ARG could be exploited as a ternary component to improve the physicochemical properties of CFA viaβCD complexation.