Spectral characteristics of flutamide drug have been studied in various solvents and beta-cyclodextrin (beta-CD). The inclusion complex of flutamide with beta-CD is analysed by UV-visible, fluorimetry, FT-IR, 1H NMR, SEM, DSC and AM1 methods. In all solvents, flutamide exhibits a dual fluorescence. The longer wavelength emission (A band approximately 380 nm) is due to intramolecular charge transfer state (ICT) and the shorter wavelength emission (B band approximately 285 nm) originates from a locally excited state. In beta-CD, the increase in the fluorescence intensity of 'A' band indicates ICT emission enhanced in the beta-CD medium. beta-CD studies shows isopropyl group is present in the interior part of the beta-CD cavity whereas amino and CF(3) groups are present in the outside of the beta-CD cavity. A mechanism is proposed to explain the 1:1 inclusion process.