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Psoriasis is an inflammatory and proliferate disease of skin that results in rapid turnover of skin cells. Tea tree oil (TTO) is the essential oil steam-distilled from Melaleuca alternifolia, known for its antimicrobial, antifungal and anti-inflammatory properties. This oil is a mix of many terpenes and among them terpinen-4-ol is the main active component. The study aimed at formulating a microemulsion based transdermal drug delivery system for psoriasis. Microemulsions were formulated using 5% Tea tree oil, different concentrations of Polysorbate 80 as surfactant and Isopropyl Myristate and Isopropyl alcohol as cosurfactants. The formulations were characterized for pH, Droplet size, PDI, Viscosity and Surface morphology. The mean droplet size of the microemulsion was found in the range of 84-115 nm with a PDI of 0.764 indicating uniformity in the microemulsion. Rheological data was assessed for viscosity and microemulsions were found to be low viscosity system. The maximum terpinen-4-ol content observed was 1.68 µg/mg of microemulsion. The TEM images of the microemulsion depicted spherical shape and even boundary of the oil particles. The skin diffusion studies clearly depicted the enhanced ability of microemulsion to deliver the drugs through transdermal application. About 14.5% Tepinen-4-ol penetration was observed from the microemulsion. Skin irritation confirmed that levels up to 5% tea tree oil could be safely applied to the skin. The studies showed that microemulsion system of tea tree oil might be promising vehicles for the transdermal delivery for psoriasis.