BCS class III hydrophilic compounds are often associated with low oral bioavailability due to their poor epithelial permeability in the gastrointestinal tract. In this study, we reported an approach of incorporating a drug complex into an in situ gelling muco-adhesive carrier to achieve an improved bioavailability of a poorly absorbed hydrophilic compound. A new molecular entity (RWJ-445167) from Johnson and Johnson was used as a model compound. The compound was first complexed with sodium lauryl sulfate (SLS). The complex was then incorporated into an in situ gelling muco-adhesive carrier Cremophor for formulation characterization and rat pharmacokinetic (PK) studies. The study results showed that RWJ-445167 bound to SLS at a stoichiometric ratio. By complexing with SLS, the compound became lipophilic. The aqueous solubility of RWJ-445167 dropped to 0.58 mg/mL for the complex from 61 mg/mL for the free compound, while the partitioning coefficient of the complex increased to 7.59, compared with 0.05 of the free compound. In the rat PK study, with duodenal administration, the complex in the in situ-gelling formulation achieved 28.24% of bioavailability, compared to 4.26% of the free compound solution. The enhanced bioavailability was also significantly higher than those in the RWJ-445167/SLS physical mixture in Cremophor (14.91%), the complex in non-gelling carrier PEG 400 (9.95%) and the RWJ-445167/SLS physical mixture in PEG 400 carrier (8.60%). The study demonstrates that incorporation of a drug complex into an in situ gelling formulation provides a new approach to improving bioavailability of BCS class III drugs.