Partially methylated cyclodextrins with enhanced solubility in water have an average degree of methylation of hydroxyl groups at different positions in all the glucose units involved of about 53-64% for the 2-position, about 38-51% for the 3-position and about 70-100% for the 6-position. The partially methylated cyclodextrins are prepared by reacting .beta.-cyclodextrin with more than about 30 equivalent proportions based on the .beta.-cyclodextrin of dimethyl sulfate and more than about 30 equivalent proportions of an alkali metal hydroxide, wherein the concentration of reactants is greater than 10% (wt/wt).