Honokiol is a phytochemical isolated from the Magnolia plant. It exhibits significant antitumor activity against a variety of cancer cell types via targeting of critical mediators of tumor progression, stromal remodeling, and chemoresistance. However, poor bioavailability and inefficient tumor uptake remain some of the hurdles in its translation as a therapeutically useful drug. Here, we developed a nanoformulation of honokiol using mesenchymal stem cell-derived exosomes, which are nonimmunogenic and express surface markers to support their tumor-targeted delivery. Maximum entrapment of honokiol occurred when it was mixed in a 1:4 weight ratio with exosomes and subjected to six cycles of sonication. Dynamic light scattering analysis demonstrated that the average size (∼175.3 nm), polydispersity (∼0.11), and integrity (∼12.9 mV) of exosomes remained in the desirable range post honokiol encapsulation. Exosome-encapsulated honokiol exhibited significantly higher therapeutic efficacy over the free honokiol in WST-1 growth and long-term clonogenicity assays. Flow cytometry-based cell cycle and live/dead cell assay, respectively, confirmed the enhanced effect of exosomal honokiol formulation on cell cycle arrest and apoptosis induction. More significant alterations in the expression of cell cycle- and survival-associated proteins were also observed in cancer cells treated with exosomal honokiol over free honokiol. Higher intracellular accumulation of honokiol was recorded in cancer cells treated with equivalent doses of honokiol as compared to the free honokiol. Together, our work is the first demonstration of exosomal encapsulation of honokiol and its improved antitumor efficacy resulting from improved cellular uptake.