The present work is aimed at formulation and evaluation of floating drug delivery system of nateglinide for the management of diabetes. Hollow microspheres (microballoons), loaded with nateglinide in their outer polymer shells were prepared by using emulsion solvent diffusion method. The prepared formulations were evaluated for their surface morphology by scanning electron microscopy (SEM), micromeretic properties, % drug entrapment efficiency, % buoyancy and in-vitro drug release studies. The prepared microspheres exhibited prolonged drug release (24 h) and remained buoyant for >12 h. The mean particle size increased and the drug release rate decreased at higher polymer concentrations. No significant effect of the stirring rate during preparation on drug release was observed. The release pattern of nateglinide in simulated gastric fluid from all floating microspheres showed their sustained action.