Recently, tert-butyl alcohol (TBA) has emerged as a commercially competent reagent for biofuel production, but forms a minimum boiling azeotrope with water which restricts its applicability. This paper presents a comprehensive methodology for the dehydration of TBA by extractive distillation (ED). In entrainer selection, glycolic and ionic liquids were investigated followed by VLE measurements and thermodynamic modeling. On the basis of evaluated results, pseudobinary, isovolatility and equivolatility curves have been explored to rank accurately the selected entrainers. Triethylene glycol (TEG) and 1-ethyl-3-methylimidazolium chloride [emim][Cl] emerged as the most appropriate entrainer. Finally, the process design and optimization was carried out with the minimization of total annualized cost (TAC) as the objective function. The process economics demonstrated a notable reduction of 13.9% in the TAC for [emim][Cl] as compared to TEG as an entrainer for obtaining anhydrous TBA, thereby justifying the use of ionic liquids as the new generation entrainers.