The aim of the present study was the encapsulation of cedar (Juniperus phoenicea) essential oil (CEO) of Greek origin in β-cyclodextrin (β-CD) through the formation of inclusion complexes (ICs) using the co-precipitation method with different β-CD-to-CEO weight ratios (90:10, 85:15, 80:20, 70:30 (w/w)). The encapsulation of CEO in β-CD through host–guest interactions was confirmed by Nuclear Magnetic Resonance (NMR) spectroscopy, FT-IR spectroscopy, Differential Scanning Calorimetry (DSC) and Thermogravimetric Analysis (TGA). The obtained ICs exhibited nanoscale size (315.9 nm to 769.6 nm),Polydispersity Index from 0.326 to 0.604 and satisfactory stability in suspension (−37.0 mV to −17.0 mV). The process yield was satisfactory, ranging between 65% and 78%, while the inclusion efficiency ranged from 10% to 27%. The in vitro release study conducted for the IC with the optimal characteristics (β-CD:CEO 80:20 (w/w)) exhibited a sustained release profile, with an initial burst effect in the first 5 h. The release profile could be well expressed by the Higuchi equation: Q = 18.893 t^1/2 + 9.5919, R² = 0.8491. The cedar EO presented significant acetylcholinesterase inhibition (IC₅₀ 37 μg/mL), which was prolonged by its encapsulation into the β-CD cavity.