With advances in refractive surgery and demand for cataract removal and lens replacement, the ocular use of nonsteroidal anti-inflammatory drugs (NSAIDs) has increased. One of the most commonly used NSAIDs is diclofenac (Diclo). In this study, cyclodextrins (CDs), α-, β-, γ-, and HP-β-CDs, were investigated with in vitro irritation and in vivo ulceration models in rabbits to reduce Diclo toxicity. Diclo-, α-, β-, γ-, and HP-β-CD inclusion complexes were prepared and characterized and Diclo-CD complexes were evaluated for corneal permeation, red blood cell (RBCs) haemolysis, corneal opacity/permeability, and toxicity. Guest- (Diclo-) host (CD) solid inclusion complexes were formed only with β-, γ-, and HP-β-CDs. Amphipathic properties for Diclo were recorded and this surfactant-like functionality might contribute to the unwanted effects of Diclo on the surface of the eye. Contact angle and spreading coefficients were used to assess Diclo-CDs in solution. Reduction of ocular toxicity 3-fold to16-fold and comparable corneal permeability to free Diclo were recorded only with Diclo-γ-CD and Diclo-HP-β-CD complexes. These two complexes showed faster healing rates without scar formation compared with exposure to the Diclo solution and to untreated groups. This study also highlighted that Diclo-γ-CD and Diclo-HP-β-CD demonstrated fast healing without scar formation.