AbstractOctadecyl 3-(3,5-di-tert-butyl-4-hydroxyphenyl) propanoate (ODHP) was extracted in a previous study from the culture broth of soil isolate Alcaligenes faecalis MT332429 and showed a promising antimycotic activity. This study was aimed to formulate ODHP loaded β-cyclodextrins (CD) nanosponge (NS) hydrogel (HG) to control skin fungal ailments since nanosponges augment the retention of tested agents in the skin. Box-Behnken design was used to produce the optimized NS formulation, where entrapment efficiency percent (EE%), polydispersity index (PDI), and particle size (PS) were assigned as dependent parameters, while the independent process parameters were polyvinyl alcohol % (w/v %), polymer-linker ratio, homogenization time, and speed. The carbopol 940 hydrogel was then created by incorporating the nanosponges. The hydrogel fit Higuchi’s kinetic release model the best, according to in vitro drug release. Stability and photodegradation studies revealed that the NS-HG remained stable under tested conditions. The formulation also showed higher in vitro antifungal activity against Candida albicans compared to the control fluconazole. In vivo study showed that ODHP-NS-HG increased survival rates, wound contraction, and healing of wound gap and inhibited the inflammation process compared to the other control groups. The histopathological examinations and Masson’s trichrome staining showed improved healing and higher records of collagen deposition. Moreover, the permeability of ODHP-NS-HG was higher through rats’ skin by 1.5-folds compared to the control isoconazole 1%. Therefore, based on these results, NS-HG formulation is a potential carrier for enhanced and improved topical delivery of ODHP. Our study is a pioneering research on the development of a formulation for ODHP produced naturally from soil bacteria.Key points• Octadecyl 3-(3,5-di-tert-butyl-4-hydroxyphenyl) propanoate was successfully formulated as a nanosponge hydrogel and statistically optimized.• The new formula exhibited in vitro good stability, drug release, and higher antifungal activity against C. albicans as compared to the fluconazole.• Ex vivo showed enhanced skin permeability, and in vivo analysis showed high antifungal activity as evidenced by measurement of various biochemical parameters and histopathological examination.