This study was designed to investigate the precipitation of a lipophilic drug following dispersion of lipid formulations in water. The model drug fenofibrate was formulated in representative lipid delivery systems designed for oral administration, using medium chain glycerides, polysorbates, and propylene glycol as excipients. Aqueous dispersion of water-insoluble self-emulsifying lipid formulations resulted in turbid emulsions, followed subsequently by very slow precipitation of 3-7% of the dose of fenofibrate. Self-emulsifying formulations that included water-soluble surfactants, which dissolved a lower mass of drug in solution at equilibrium, nevertheless typically maintained drugs in a metastable state, following dilution with water, for several hours or even days. Formulations with higher contents of hydrophilic materials resulted in more rapid precipitation. Extensive precipitation of fenofibrate from oil-free formulations, comprising of only surfactants and cosolvents, took place within 30 min. The results indicated that most of the lipid systems were supersaturated with respect to the drug on dilution, but the extent of precipitation varied significantly between formulations and was influenced by the extent of supersaturation after dilution. The study suggests that the use of hydrophilic formulations for delivery of lipophilic drugs may result in a greater extent of drug precipitation in the stomach.