UNIL088 is a water-soluble prodrug of cyclosporine A (CsA) developed for topical eye delivery. Such a prodrug has to fulfil two paradoxical requirements as it must be rapidly hydrolysed under physiological conditions but also retain a long shelf-life in aqueous media. This study has been conducted to explore the stability of UNIL088 formulated as an eyedrop solution. The stability study of the prodrug was performed over a pH range of 5–7 at 20 °C and at various ionic strengths. The molecule was more stable at pH 5 than at pH 7 with conversion rate constant of 3.2 × 10−3 and 26.0 × 10−3 days−1, respectively. The effect of temperature was studied at four different temperatures and activation energy was determined. Conversion of UNIL088 followed a pseudo-first-order kinetic with an activation energy of 79.4 kJ mol−1. Due to its low solubility, CsA generated precipitated in the solution. The average size of CsA precipitates, determined by photon spectroscopy, was 0.22 and 1.08 μm at 7 and 14 days, respectively. The hydrolysis mechanism was partially elucidated by identification of the intermediate pSer-Sar-CsA.