The present work investigates effectiveness of basil oil, a volatile oil containing alcoholic terpenes, as a potential penetration enhancer for improved skin permeation of labetolol hydrochloride (LHCl) with reference to camphor, geraniol, thymol, and clove oil. Saturation solubilities of LHCl were determined in water, vehicle (ethanol:water, 60:40 v/v) and vehicle containing 5% w/v terpenes. Comparable (P > 0.05) saturation solubilities were found suggesting an insignificant increase in LHCl flux across rat skin on account of thermodynamic activity. Permeation of LHCl in vehicle per se and in presence of 5% w/v enhancer was investigated by performing in vitro rat abdominal skin permeation studies using a side-by-side glass diffusion cell. Various parameters viz. steady state flux, permeability coefficient, lag time, partition coefficient, diffusion coefficient, and enhancement ratios (ER) were calculated from the permeation data. Basil oil produced the maximum enhancement (ER = 46.52) over neat vehicle, among all enhancers. Activation energies for LHCl permeation in water, vehicle per se and in presence of 5% w/v basil oil were found to be 23.16, 18.71, and 10.98 kcal/mole, respectively. Lowering of activation energy in presence of basil oil suggests creation of new polar pathways in the skin for enhanced permeation of LHCl. Basil oil is proposed as a promising penetration enhancer for improved transdermal drug delivery of labetolol.