Interpolymer complex formation through hydrogen bonding has been investigated between two polymers: poly(acrylamide) (PAAm) and poly(vinyl alcohol) (PVA). The differential properties of the interpolymer complex with varying molecular weights of PVA have been studied by taking three different molecular weights of PVA. Furthermore, the host-guest interaction between the interpolymer complexes prepared and beta-cyclodextrin (beta-CD) has also been studied in detail. PAAm can form interpolymer complexes with PVA because of a cooperative hydrogen bonding interaction. The addition of beta-CD to a dilute aqueous solution of PAAm-PVA results in a competition between interpolymer hydrogen bonding and host-guest interactions. In this article, we have tried to decipher the complex chemistry that occurs in the microheterogeneous solution. The PAAm-PVA binary system and the PAAm-PVA-beta-CD ternary systems have been well characterized by using a fluorescent probe, coumarin-102. Dynamic light scattering (DLS), Fourier transform infrared (FTIR), fluorescence microscopy, and time-resolved fluorescence studies have been performed to substantiate steady-state fluorescence experiments. The results indicate the occurrence of a competitive interaction between the hydrogen bonding of the interpolymer complexes and the host guest interaction with beta-CD, whereby the later predominates. It is probable that the hydrophobic cavity of beta-CD is threaded with linear polymers, thus forming a macromolecular supraassembly. It has also been concluded that PAAm preferentially interacts with beta-CD by compromising its interaction with PVA. The enhanced deposition and retention of actives with this system was studied with a single species regrowth assay, antibacterial efficacy and the cell viability were studied using the live-dead staining protocol. This therefore opens new avenues in the targeted delivery of actives.