The objective of the present research is to develop a new particulate preparation process for dry powder inhalation by which peptide-loaded poly(DL-lactic-co-glycolic acid) nanospheres are granulated with sugar alcohol (mannitol, around 4 mu m in diameter). A spray-drying fluidized bed granulator was used to form soft matrix composite granules. A nanosphere suspension can be readily obtained by dispersing the composite granules in distilled water. The composite granules showed inhalation performance superior to that of freeze-dried nanosphere powder. More than 50% of composite granules were delivered to the bronchioles and alveoli of a rat. The composite granules of insulin-loaded nanosphere have a strong and prolonged pharmacological effect compared to the inhalation of insulin solution.