Xanthan gum (XG), a trisaccharide branched polymer and poly vinyl alcohol (PVA), was used to develop pH-sensitive interpenetrating network (IPN) microspheres by emulsion cross-linking method in the presence of glutaraldehyde as a cross-linker to deliver model anti-inflammatory drug, diclofenac sodium (DS) to the intestine. Various formulations were prepared by changing the ratio of XG:PVA, extent of cross-linking in order to optimize the formulation variables on drug encapsulation efficiency, and release rate. Formation of interpenetrating network and the chemical stability of DS after penetration of microspheres was confirmed by Fourier Transform infrared (FTIR) spectroscopy. Differential scanning calorimetry (DSC) and X-ray diffraction (XRD) analysis were done on the drug loaded microspheres which confirmed molecular dispersion of DS in the IPN. Microspheres formed were spherical with smooth surfaces, as evidenced by scanning electron microscopy (SEM), and mean particle size, as measured by laser light scattering technique ranged between 310.25-477.10 microm. Drug encapsulation of up to 82.94% was achieved as measured by UV method. Both equilibrium and dynamic swelling studies and in vitro release studies were performed in pH 1.2 and 6.8. Release data indicated a Fickian trend of drug release which depends on the extent of cross-linking and the ratio of XG:PVA present in the microsphere. When subjected to in vivo pharmacokinetic evaluation in rabbits, microparticles show slow and prolonged drug release when compared with DS solution. Based on the results of in vitro and in vivo studies it was concluded that these IPN microspheres provided oral controlled release of water-soluble DS.