Nanosponges (NS) are a recently developed class of hyper-branched polymers, nano-structured to form three dimensional meshwork; obtained by reacting cyclodextrins with a cross linker like diphenyl carbonate. Herein, we report an anomalous behavior of NS with regards to physical and morphological characteristics and drug encapsulation behavior by minor synthetic modification. Two distinct forms viz. crystalline and para-crystalline of NS were identified and extensively characterized by use of high resolution transmission electron microscopy (HR-TEM), X-ray powder diffraction (XRPD), scanning electron microscope, atomic force microscope, optical microscope and Fourier transform infra-red attenuated total reflectance spectroscopy (FTIR-ATR). Dimension of the crystal lattice was found to be equal to 0.61 nm. Higher magnifications clearly showed a zone axis with a hexagonal symmetry as that of beta-cyclodextrin. XRPD patterns were in concurrence with the HR-TEM results. Solubility studies with a model drug dexamethasone (DEX) showed more than three folds increase in the solubility of the drug in the crystalline NS as compared to the para-crystalline ones. Percent drug association and drug loading for DEX was found to be higher in the crystalline type of NS. An In vitro drug kinetic study evidenced a faster release of DEX from the crystalline type NS. The particle sizes of the formulations were as follows: crystalline NS: 688.6 ± 38.0 nm, para-crystalline NS: 702.2 ± 21.2 nm with polydispersity indices of 0.155 and 0.132; zeta-potential of -26.55 ± 1.7 and -23.42 ± 2.1 respectively. Differential scanning calorimetry and thermogravimetric analysis revealed that both forms encapsulated the drug satisfactorily. FTIR-ATR and Raman spectroscopy showed weak interactions. Crystallinity of NS was thus found to be an important factor in solubilization, in vitro kinetics and encapsulation behavior and can be tuned to give a tailored drug release profile or formulation characteristics. © 2012 Springer Science+Business Media B.V.