Piroxicam is one of the NSAID, which is used in the systemic and topical treatment of a variety of inflammatory conditions. Conventionally, for topical use, the drug is formulated in gel. We designed an phonophoretic drug delivery system to investigate the piroxicam permeability and the influence of ultrasound application (continuous mode, pulsed mode), frequency (1.0 MHz, 3.0 MHz) and intensity $(1.0;w/cm^2,;1.5;w/cm^2,;2.0;w/cm^2)$ with 0.5% piroxicam gel. Per cutaneous absorption studies were performed in vitro models to determine the rate of drug absorption via the skin. Permeation study using hairless mouse skin was performed at $37^{circ}C$ using buffered saline (pH 7.4, 10% propylene glycol solution) as the receptor solution. Anti-inflammatory activity was determined using carrageenan-induced foot edema model in rat. A pronounced effect of ultrasound on the skin absorption of the piroxicam was observed at all ultrasound energy level studied. Ultrasound was carried out for 10 hr. The highest permeation was observed at intensity of $2.0;w/cm^2$, frequency of 1.0 MHz and continuous output. The inclusion of phonophoresis was found to improve significantly the skin permeation in vitro and the anti-inflammatory activity in vivo.