Babchi (Psoralea corylifolia) oil is an important essential oil used in several traditional medicines to cure various disorders. This phytotherapeutic agent possesses number of pharmacological activities including antibacterial, antifungal, antioxidant, anti-inflammatory, immunomodulatory and antitumor. However, volatile nature, poor stability and solubility of babchi oil (BO) restrict its pharmaceutical applications. Hence, the aim of the present work was to encapsulate this oil in β-cyclodextrin nanosponges (NS) in order to overcome above limitations. To fabricate nanosponges, β-cyclodextrin was crosslinked with diphenyl carbonate in different molar ratios viz.1:2, 1:4, 1:6, 1:8 and 1:10. The blank nanosponges were loaded with babchi oil using freeze-drying method. Particle size of the babchi oil loaded nanosponges was found to lie between 200-500 nm, with low polydispersity index. Further, zeta potential, Fourier transform infrared spectroscopy, X-ray diffraction, thermal analysis and electron microscopy were carried out for characterization of babchi oil nanosponges. Results obtained from spectral analysis ascertained the formation of inclusion complexes. Additionally, solubilisation efficiency of the babchi oil was checked in distilled water and found enhanced by 4.95 times with optimized β-cyclodextrin nanosponges. The cytotoxicity study was carried out by MTT assay using HaCaT cell lines. A significant improvement in photostability of essential oil was also observed by inclusion in nanosponges. Lastly, the optimized formulation was tested for antibacterial activity using Staphylococcus aureus, Pseudomonas aeruginosa and Escherichia coli. Hence, encapsulation of BO in nanosponges resulted in efficacious carrier system in terms of solubility, photostability as well as safety of this oil along with handling benefits.