Quercetin (QCE) is a pharmacologically pleiotropic flavonol whose clinical development is challenged by poor aqueous solubility, chemical instability, extensive pre-systemic metabolism, and low, variable systemic exposure. This critical mechanistic review examines how cyclodextrin (CD) engineering improves biopharmaceutical performance and how these improvements relate to available pharmacokinetic (PK) and pharmacodynamic (PD) evidence. Published studies of β-CD, its hydroxypropyl, sulfobutylether, and methyl derivatives, and γ-CD were examined for complex stoichiometry, binding stability, solid-state properties, solubility, dissolution, permeability, and available exposure and response outcomes. Representative β-CD systems increased aqueous solubility approximately 2.2 to 4.6-fold, while selected hydroxypropyl-β-CD formulations achieved increases approaching 630-fold. Lyophilised hydroxypropyl-β-CD complexes investigated for nasal delivery increased solubility approximately 14 to 50-fold across pH 1.2 to 6.8 and enabled measurable ex vivo permeation across rabbit nasal mucosa, where uncomplexed QCE showed negligible transport. These study-specific findings reflect different formulations and experimental conditions, rather than a direct comparison of CD performance. In eight healthy participants, an isoquercitrin (QCE-3-O-glucoside)–γ-CD formulation showed approximately 10.5-fold higher relative bioavailability than quercetin formulated in dextrin. This result does not isolate the contribution of CD complexation from that of glycosylation or establish therapeutic efficacy. Mechanistic contributors include host–guest inclusion, reduced crystallinity, enhanced apparent aqueous solubility, and molecular stabilisation. Reversible complexation also influences the availability of unbound drug for membrane permeation. However, solubility enhancement alone does not ensure proportional exposure or therapeutic response. We therefore propose a CD–QCE Formulation–Exposure–Response framework linking supramolecular interactions and biopharmaceutical properties with PK disposition and PD outcomes. The framework supports formulation-specific CD selection and identifies the need for matched exposure–response studies, route-specific safety assessment, and clinical validation when developing QCE systems for neurodegenerative, infectious, and oncological applications.