The present study deals with application of melt granulation technology to develop sustained release formulation of aceclofenac with lipidic excipients (Compritol 888 ATO). This approach is concerned with the use of minimum number of excipients to reduce the tablet weight and increase the compatibility of the drug. The continuous melt granulation/extrusion was done by optimizing the formulation as well as processing parameter such as drug loading, operating temperature, screw speed and feed rate during the process. The FTIR study revealed that there is no chemical interaction exists in between the drug and lipidic excipients while DSC and XRD studies exhibited crystalline state of the drug after melt granulation. The scanning electron microscopic examination of melt extrudates revealed the agglomerated particles with porous network and rough surface. The developed tablet (80% drug loading) has weight of  250 mg (mini tablet) containing 200mg of aceclofenac and it showed sustained release profile upto 24h.