In this study, a quality-by-design (QbD) approach was used to optimize the development of paracetamol (PMOL) sustained-release formulations manufactured by hot-melt extrusion (HME). For the purpose of the study, in-line near-infrared (NIR) spectroscopy as a process analytical technology (PAT) was explored while a design of experiment (DoE) was implemented to assess the effect of the process critical parameters and to identify the critical quality attributes (CQA) of the extrusion processing. Blends of paracetamol, ethyl cellulose (EC) and Compritol® 888 ATO (C888) were processed using a twin screw extruder to investigate the effect of screw speed, feed rate and drug loading on the dissolution rates and particle size distribution. The principal component analysis (PCA) of the NIR collected signal revealed the optimum extrusion processing parameters. Furthermore, the integration of the DoE experiments demonstrated that drug loading has a significant effect on the only quality attribute, which was the PMOL dissolution rate. This QbD approach was employed as a paradigm for the development of pharmaceutical formulations via HME processing.