An edible microemulsion (ME) composed of Tween 80/butyl lactate/isopropyl myristate (IPM)/water has been formulated. Pseudoternary phase diagram of the system contains a large single isotropic region. The phase behavior of the system is also studied at low pH (2.6) and in 0.9% NaCl solution. Conductivity, viscosity, ultrasonic velocity, and compressibility studies find consistent results in the structural transition (from water-in-oil (w/o) to bicontinuous, and from bicontinuous to oil-in-water (o/w)) behavior of the ME. Dynamic light scattering studies reveal the size of the MEs. The absorption and steady state emission spectra of 4-(dicyanomethylene)-2-methyl-6-(p-dimethylamino-styryl)-4H-pyran (DCM) successfully probe the polarity of the ME at its solvation shell and shows the efficacy of hosting model drug molecules. The rotational anisotropy of the dye has been studied to ascertain the geometrical restriction of the probe molecule. Picosecond-resolved fluorescence spectroscopy applies well to study the relaxation dynamics of water in the solvation shell of the MEs. The study finds strong correlation in the relaxation dynamics of water with the structure of host assembly and offers an edible ME system which could act as a potential drug delivery system and nontoxic nanotemplate for other applications.