Surfactants are routinely employed to increase the apparent aqueous solubility of poorly soluble drugs. Yet the impact of micellar solubilization on the intestinal membrane permeability of a lipophilic drug is often overlooked and poorly understood. In this work, the interplay between the apparent solubility increase and intestinal membrane permeability decrease that exists when surfactants are used as drug solubility enhancers is described. A quasi-equilibrium mechanistic mass transport analysis was developed and employed to describe the effect of micellar solubilization by sodium taurocholate (STC) and sodium lauryl sulfate (SLS) on the intestinal membrane permeability of the lipophilic drug progesterone. The model considers the effects of micellar solubilization on both the membrane permeability (P(m)) and the unstirred water layer (UWL) permeability (P(aq)), to predict the overall effective permeability (P(eff)) dependence on surfactant concentration (C(S)). The analysis reveals that (1) the effective UWL thickness (h(aq)) quickly decreases with increasing C(S) above the critical micelle concentration (CMC), such that P(aq) markedly increases with increasing C(S); (2) the free fraction of drug available for membrane permeation decreases with increasing C(S) above CMC, such that P(m) decreases with increasing C(S); and (3) P(aq) increases and P(m) decreases with increasing C(S) above CMC, consequently the UWL is effectively shorted out and the overall P(eff) tends toward membrane control with increasing C(S). The model enabled excellent quantitative prediction of the progesterone P(eff) as a function of C(S) in the rat jejunal perfusion model. This work demonstrates that a trade-off exists between micellar apparent solubility increase and permeability decrease that must be taken into account to strike the optimal solubility-permeability balance. The model presented in this work offers the formulation scientist a simple method for a priori prediction of this interplay, in order to maximize the overall oral absorption.