The in vitro dissolution property of slightly water soluble Carvedilol was improved by exploring the potential of Liquisolid system (LS). The in vitro release pattern of Liquisolid compacts and directly compressed tablets were studied using USP-II apparatus. Different Liquisolid compacts were prepared using a mathematical model to calculate the required quantities of powder and liquid ingredients to produce acceptably flowable and compressible admixture. Avicel PH 102, Aerosil 200 and Sodium starch glycolate were employed as carrier, coating material and disintegrant respectively for preparing Liquisolid compacts. The prepared Liquisolid compacts were evaluated for their flow properties such as bulk density, tapped density, angle of repose, Carr’s compressibility index and Hausner’s ratio. The interaction between drug and excipients in prepared Liquisolid compacts were studied by differential scanning calorimetry (DSC) and Xray diffraction (XRD). The drug release rates of Liquisolid compacts were distinctly higher as compared to directly compressed tablets, which show significant benefit of Liquisolid compact in increasing wetting properties and surface area of drug available for dissolution. The LS-1 of Liquisolid powder system showed acceptable flowability, Carr’s compressibility index and Hausner’s ratio. The DSC and XRD studies conforms the no significant interaction between the drug and excipients used in Liquisolid compacts. From this study it concludes that the Liquisolid technique is a promising alternative for improvement of dissolution property of water-insoluble drugs.