We had investigated the xanthine oxidase inhibitory activity and uric acid lowering effect of newly marketed xanthine oxidase inhibitor, febuxostat and compared its effect with allopurinol in vitro. In hyperuricemic animal model serum uric acid, lowering effect of these drugs was evaluated. Serial dilutions of febuxostat and allopurinol were made, ranging from100 µg/ml to 0.75µg/ml. Xanthine oxidase inhibition was carried out in vitro. Hyperuricemia was induced in Wistar rats by potassium oxonate injection on day 1, 3 and 7. Febuxostat and allopurinol (5mg/kg) once daily was given for 7 days. Serum uric acid was measured on day zero, 1, 3 and 7 by uricase method. Michaelis Menten equation was applied to calculate IC50, Vmax and Km. IC50 of allopurinol and febuxostat were 9.07 and 8.77 µg/ml respectively. Km and Vmax of febuxostat were 8.89 and 107.13 where as allopurinol showed Km 7.77 and Vmax 194.14.Graded dose response was observed for both allopurinol and febuxostat. Hyperuricemia was successfully induced with potassium oxonate. Treatment with allopurinol reduced serum uric acid levels up to 3.21±0.8mg/dl on day 7, but reduction was less than febuxostat 0.81 ± 0.12 mg/dl. From this study, we have concluded that febuxostat is an effective option for cases of hyperuricemia.