This study evaluated the potential of poly(iso-butyl cyanoacrylate) (PBCA) nanocapsules dispersed in a biocompatible microemulsion to facilitate the absorption of insulin following intragastric administration to diabetic rats. Insulin-loaded PBCA nanocapsules were prepared in-situ in a biocompatible water-in-oil microemulsion by interfacial polymerisation. The microemulsion consisted of a mixture of medium-chain mono-, di- and tri-glycerides as the oil component, polysorbate 80 and sorbitan mono-oleate as surfactants and an aqueous solution of insulin. Resulting nanocapsules were approximately 200 nm in diameter and demonstrated a high efficiency of insulin entrapment (> 80%). In-vitro release studies showed that PBCA nanocapsules could suppress insulin release in acidic media and that release at near neutral conditions could be manipulated by varying the amount of monomer used for polymerisation. Subcutaneous administration of insulin-loaded nanocapsules to diabetic rats demonstrated that the bioactivity of insulin was largely retained following this method of preparing peptide-loaded nanocapsules and that the pharmacodynamic response was dependent on the amount of monomer used for polymerisation. The intragastric administration of insulin-loaded nanocapsules dispersed in the biocompatible microemulsion resulted in a significantly greater reduction in blood glucose levels of diabetic rats than an aqueous insulin solution or insulin formulated in the same microemulsion. This study demonstrates that the formulation of peptides within PBCA nanocapsules that are administered dispersed in a microemulsion can facilitate the oral absorption of encapsulated peptide. Such a system can be prepared in-situ by the interfacial polymerisation of a water-in-oil biocompatible microemulsion.