The complexation of terfenadine (Terf) with β-cyclodextrin (β-CD) in solution and solid state has been investigated by phase solubility diagram (PSD), differential scanning calorimetry (DSC), powder X-ray diffractometry (PXD) and proton nuclear magnetic resonance (1H-NMR). The PSD results indicated that the salt saturation with the buffer counter ion (citrate−2, H2PO 4 −1 and Cl−1 ions) of Terf (pK a = 9.5) and the hydrophobic effect play in tandem to increase the value of the complex formation constant (K11) measured at different conditions of pH, ionic strength, buffer type and buffer concentration. The correlation of the free energy of complex formation (ΔG11) with the free energy of inherent solubility of Terf (ΔGSo) obtained by changing the pH, ionic strength and buffer concentration was used to measure the contribution of the hydrophobic effect (desolvation) to complex formation. The hydrophobic effect was found to constitute 57.8% of the driving force for complex stability, while other factors including specific interactions contribute −13.4 kJ/mol. 1H-NMR spectra of Terf–citrate and Terf–HCl salts gave identical chemical shift displacements (ΔΔ) upon complexation, thus indicating that the counter anions are positioned somewhere outside of the β-CD cavity. DSC, XRPD and 1H-NMR proved the formation of solid Terf/acid/β-CD ternary complexes.