Nateglinide, an oral hypoglycemic agent is having disadvantage of low systemic bioavailability, poor absorption in upper intestinal tract, and short biological half life (1.5hr) for increasing the resident time of this drug in stomach spray drying technique used for preparation of mucoadhesive microspheres consist of different polymers like Hydroxypropyl Methycellulose (HPMC), Hydroxypropyl cellulose (HPC), Polyvinylpyrrolidone (PVP), Sodium alginate and ethyl cellulose with Nateglinide. The surface morphology and particle shape were studied by scanning electron microscope (SEM). The microspheres were evaluated for their micro encapsulation efficiency. The micro encapsulation efficiency of microspheres evaluated. Mucoadhesive microspheres prepared were spherical in shape, size in the range of 2.6-5μm.In vitro drug release performed for all the formulation and in vivo study of optimum formulation (F3) and pure Nateglinide in normal healthy rabbits performed. The micro encapsulation efficiency was in the range of 76.75 % - 89.36 % and microspheres of formulations (F1, F2, F3, F4, F6, and F7) have shown good mucoadhesive property. F3 had shown significant hypoglycaemic effect upto period from 5 hrs to 19 hrs, whereas pure Nateglinide showed the reduction of 39.85% after a period of 3hrs and reached normal with in 6.5hrs.