Abstract: Xanthone has low aqueous solubility, thus limiting its food application. The aim of this study is to increase aqueous solubility of xanthone through spray drying xanthone in fish oil with maltodextrin and gum Arabic. Powder yield and microencapsulation efficiency at inlet temperature of 120 °C and wall-to-core ratio of 6:1 were 63.0 ± 2.0% and 50.8 ± 2.0%, respectively. Solubility of spray dried xanthone increased from 3.2 ± 0.2 µg/mL for free xanthone to 128.3 ± 5.6 µg/mL (approximately 40-fold increase). Storage condition of 33% RH showed no structural changes for powder; thus, it is recommended as the suitable storage condition for spray dried xanthone. Approximately 37.2 ± 4.8% of xanthone was released in simulated gastrointestinal fluid after 6 h. Spray-dried xanthone is potentially used as a potential functional food ingredient. Practical Applications: Xanthone has gained much attention from the public as it exhibited antioxidant, antibacterial, anticancer, anti-inflammatory and antimalarial activities. Its poor aqueous solubility, however, limits the application of xanthone in food and pharmaceutical industries. The current work is significant to improve the aqueous solubility of xanthone and to protect xanthone from oxidation (Beelders et al. 2015). The improved aqueous solubility of xanthone microcapsules is practical for functional food product development and also for improved bioavailability of xanthone.