Extended release formulation of tramadol hydrochloride (TRH) based on osmotic technology was developed and evaluated. Target release profile was selected and different variables were optimized to achieve the same. Formulation variables like level of swellable polymer, plasticizer and the coat thickness of semipermeable membrane (SPM) were found to markedly affect the drug release. TRH release was directly proportional to the levels of plasticizer but inversely proportional to the levels of swellable polymer and coat thickness of SPM. Drug release from developed formulations was independent of pH and agitation intensity but dependent on osmotic pressure of the release media. In vivo study was also performed on six healthy human volunteers and various pharmacokinetic parameters (cmax, tmax, AUC0-24, MRT) and relative bioavailability were calculated. The in vitro and in vivo results were compared with performance of two commercial tablets of TRH. The developed formulation provided more prolonged and controlled TRH release as compared to marketed formulation. In vitro-in vivo correlation (IVIVC) was analyzed according to Wagner-Nelson method. The optimized formulation (batch IVB) exhibited good IVIV correlation (R= 0.9750). The manufacturing procedure was found to be reproducible and formulations were stable during 6 months of accelerated stability testing.