Drugs having poor aqueous solubility present one of the major challenges for good bioavailability of such drugs. Many approaches have been used for solubility enhancement such as salt formation, complexation, solid dispersion etc. Hydrochlorothiazide (HCT) is one of the BCS class II drug having poor water solubility. Thus to increase its water solubility by solid dispersion technique many inert carriers are employed. HCT is used in combination of losartan potassium for management of hypertension. In present investigation we have used novel method by employing losartan potassium as a carrier for solid dispersion of HCT (SDL) as well as both losartan potassium and inert carrier urea in combination for solid dispersion of HCT (SDLU). Both the solid dispersions were prepared by physical mixture, paste method, solvent evaporation method and fusion method. Out of this SDL and SDLU prepared by solvent evaporation method exhibited maximum solubility. The FTIR study confirmed absence of any physical interaction between drugs and excipients. The XRD studies show the conversion of crystalline form of drug into amorphous form and hence, increase in the solubility. Tablets of SDTL and SDTLU were prepared by employing direct compression method and their release profiles were compared with marketed tablet containing HCT and losartan potassium. Drug release studies showed that at 90 mins release of HCT by SDTLU was found to be maximum i.e. 88.24±0.04 as compared to SDTL (74.45±0.17) and marketed tablet (62.46±0.20). Thus the studies carried out exhibited good scope of using losartan potassium and urea together for enhancing the aqueous solubility of HCT up to the mark especially when HCT is to be used in combination with Losartan potassium.