Diacerein (DAC) is a newly developed drug for the treatment of osteoarthritis. It is poorly soluble in water and has slow dissolution rate due to which its conventional solid dosage forms shows poor oral bioavailability. The unabsorbed portion of DAC degrades and causes soft stool effect. The aim of the present study was selection of components (oily phase, surfactants and cosolvents) in a systematic, fast and simple way for the development of DAC microemulsion which in turn could enhance bioavailability and reduce soft stool effect of DAC. The solubility of DAC was determined in various oily phases and cosolvents. To find out the utility of in-silico investigations Solubility Parameter Distance (Ra) between DAC and different oils phases & cosolvents was calculated. The type of the surfactant to satisfactorily emulsify the oily phase was determined according to the HLB system. Pseudoternary phase diagrams were constructed to evaluate the microemulsion existence area. The poorly water soluble DAC, was also found practically insoluble or very slightly soluble into all the oily phases and cosolvents investigated except benzyl alcohol and PEGs. So benzyl alcohol and PEG 600 were selected as oily phase and cosolvents respectively for the formulation of microemulsion. In-silico results were found in agreement with the data obtained by practical solubility experiments. Surfactant blends (TWEEN80 and SPAN80 in 80:20 ratio) having HLB 12.86 gave most satisfactory emulsion of the selected oily phase. Pseudoternary phase diagrams revels that the surfactant-cosolvent mix (Km 1:4) gave maximum solubilization of oily phase on infinite dilution with water. Drug loaded preconcentrate formulation resulted in translucent preparation (microemulsion) rather than milky preparation (crude emulsion) upon dilution with water and the resultant preparation doesn’t show any sign of precipitation/creaming/separation of components as seen with conventional emulsions over 5 hrs.