Nanonization is a simple and effective method to improve dissolution rate and oral bioavailability of drugs with poor water solubility. There is growing interest to downscale the nanocrystal production to enable early preclinical evaluation of new drug candidates when compound availability is scarce. The purpose of the present study was to investigate laser fragmentation to form nanosuspensions in aqueous solution of the insoluble model drug megestrol acetate (MA) using very little quantities of the drug. Laser fragmentation was obtained by focusing a femtosecond (fs) or nanosecond (ns) laser radiation on a magnetically stirred MA suspension in water or aqueous solution of a stabilizing agent. The size distribution and physicochemical properties of the drug nanoparticles were characterized, and the in vitro dissolution and in vivo oral pharmacokinetics of a laser fragmented formulation were evaluated. A MA nanosuspension was also prepared by media milling for comparison purpose. For both laser radiations, smaller particles were obtained as the laser power was increased, but at a cost of higher degradation. Significant nanonization was achieved after a 30-min fs laser treatment at 250 mW and a 1-h ns laser treatment at 2500 mW. The degradation induced by the laser process of the drug was primarily oxidative in nature. The crystal phase of the drug was maintained, although partial loss of crystallinity was observed. The in vitro dissolution rate and in vivo bioavailability of the laser fragmented formulation were similar to those obtained with the nanosuspension prepared by media milling, and significantly improved compared to the coarse drug powder. It follows that this laser nanonization method has potential to be used for the preclinical evaluation of new drug candidates.