Etodolac, a highly lipophilic anti-inflammatory drug, is widely used in rheumatoid arthritis usually at an oral dose of 200 mg twice daily. The commonest side effects during therapy with etodolac is generally gastrointestinal disturbances these are usually mild and reversible but in some patients are peptic ulcer and severe gastrointestinal bleeding. To eliminate these side effects and obtain high drug concentration at the application side, dermal application of etodolac seems to be an ideal route for administration. Hydrophilic gel formulations of etodolac were prepared with carboxymethylcellulose sodium. The effect of different terpenes (anethole, carvacrol, and menthol) as an enhancer on the percutaneous absorption of etodolac was also investigated. Permeation studies were carried out with unjacketed modified horizontal diffusion cells through cellulose membrane and rat skin. In vitro studies with cellulose membrane showed that all formulations presented the same drug release profile (p > 0.05). Ex vivo studies with excised rat skin revealed that etodolac was released and penetrated into rat skin quickly. Anethole, a hydrophobic terpene, enhanced the absorption of etodolac significantly (p < 0.05). This result is consistent with the fact that hydrophobic terpenes are effective on the percutaneous absorption of lipophilic drugs. Menthol and carvacrol, hydrophilic terpenes, did not enhance the absorption of etodolac. The lipophilicity of the enhancers seems an important factor in promoting penetration of etodolac through the skin. Since etodolac creates gastrointestinal disturbances, topical formulations of etodolac in gel form including 1% anethole could be an alternative.