Cytokine inhibiting drugs are much more effective when delivered intracellularly to phagocytic cells in the microencapsulated form. Dexamethasone is a powerful inhibitor of TNF-α cytokine through inhibition of NF-κB which is a gene regulator of multiple pro-inflammatory cytokines. We have determined the effect of microencapsulated dexamethasone in pro-inflammatory cytokine release both in in vitro using whole blood model, and in vivo using peritonitis model of septic shock. Microspheres of 1-4 μm mean size were prepared by using albumin polymer matrix in a one-step spray drying method. Microencapsulated form of dexamethasone with concentration of 10(-1), 10(-2) and 10(-3) M was compared to an equivalent concentration of solution form of dexamethasone in the in vitro whole blood model. The results show microencapsulated dexamethasone inhibited tumor necrosis factor-alpha (TNF-α) and interleukin-beta (IL-1β) significantly in comparison with the solution form of dexamethasone. The in vivo peritonitis model also demonstrated significant inhibition of TNF-α and IL-1β cytokines in microencapsulated form in comparison with solution form of dexamethasone. In the in vivo study, the animal survival rate after 5 days was 90%, dexamethasone in solution with gentamicin was 40% and gentamicin alone was 30%. This study demonstrates significantly improved inhibition of TNF-α and IL-1β both in vivo and in vitro when dexamethasone was used in microencapsulated form.