Oil in water (o/w) nanoemulsion is a two-phase dispersed system in which the oil can incorporate poorly water soluble drugs to form a liquid dosage form. The enhancement of bioavailability with a use of nanoemulsion has often been reported empirically and speculated to be a result of the enhanced dissolution due to a larger surface area, however, the mechanism of nanoemulsion permeation was yet to be explored. The goal of this dissertation was to understand the mechanism of nanoemulsion permeation and to control permeation and bioavailability. The first objective was to delineate the effect of thermodynamic activities of the drug in nanoemulsion on the permeation through a barrier. The flux from nanoemulsion depended on the thermodynamic activities of both ionized and unionized species in the aqueous phase of nanoemulsion. A simple nanoemulsion was not favorable to enhance the permeation over the saturated solution due to the reduced thermodynamic activity. Thus, the second objective was to elucidate the role of transient supersaturation on permeation enhancement using nanoemulsion. In vitro permeation using self-nanoemulsifying drug delivery system (SNEDDS) was enhanced over the saturated solution due to the transient supersaturation; however the enhancement of bioavailability in rats was not due to the enhanced passive permeation. Therefore there was a need to increase or prolong the supersaturation. The third objective was to control the supersaturation to enhance in vitro permeation by formulation approaches. The optimum drug loading was determined based on the precipitation kinetics; however the ability to modulate the thermodynamic activity to enhance permeation by changing the drug loading was limited. The precipitation inhibitor, hydroxypropylmethyl cellulose was able to retard the precipitation and enhanced in vitro permeation due to the increased thermodynamic activity. The significance of this work was the systematic approach to understand the mechanism of nanoemulsion absorption and to utilize nanoemulsion for permeation enhancement. The knowledge gained in this work will help rationally design the formulation in the future.