Calcium alginate gel beads have been developed in recent years as a unique vehicle for oral drug delivery due to their excellent biocompatibility, biodegradability, simple method of preparation, abundant sources, low cost and minimal processing requirements. The objective of this study was to evaluate the drug-polymer interaction in calcium alginate beads containing diflunisal. Diflunisal loaded calcium alginate beads were successfully prepared by ionotropic gelation from solution of sodium alginate and diflunisal into calcium chloride solution. The weight ratio of drug to polymer was selected as 1:1. The calcium alginate beads were characterized by size, Scanning Electron Microscopy (SEM), weight uniformity and drug entrapment efficiency. The existence of a possible interaction between diflunisal and the calcium alginate was investigated by Differential Scanning Calorimetry (DSC), Powder X-Ray Diffraction (PXRD) and Fourier Transform Infra-Red (FTIR) analysis. Drug loaded beads were spherical to oval in shape with low drug entrapment efficiency. The drug was found to be present inside the beads as crystalline to semicrystalline form with no significant physical or chemical interaction between drug and excipients. The results implied that calcium alginate beads can be used as a suitable controlled release carrier for diflunisal.