Abstract: Background and Objective: There is a growing interest to develop novel versions of traditional dairy products by upgrading their health properties. The use of wheat germ oil (WGO) known by its health-promoting effects, in the fortification of dairy products such as Labneh represents a challenge. This study was aimed to prepare nano-encapsulated WGO and to develop Labneh enriched with nano-encapsulated WGO. Materials and Methods: The WGO was encapsulated in casein micelles by pH changes and ultra-sonication. Transmission electron microscopy and laser light scattering characterized the size and shape of the prepared WGO capsules and their zeta potential was determined. The antioxidant activity and oxidative stability of encapsulated WGO were measured. Labneh was made from standardized (3% fat) milk and by replacement 50% of milk fat with free and encapsulated WGO, respectively. Labneh was analyzed for gross composition, textural parameters, colour and sensory properties during cold storage for 20 days. Results: High encapsulation efficiency (>95%) of different levels of WGO (0.3 to 1.2%) in casein micelles was obtained. The encapsulated WGO had a spherical shape and nano sizes. The particle sizes increased with the increase of the encapsulated level of WGO. The encapsulated WGO retained high DPPH scavenging activity and exhibited high oxidative stability. Labneh made with encapsulated WGO had composition and quality comparable to the control. Conclusion: Functional Labneh of acceptable quality and high antioxidant activity could be prepared by replacement of 50% of milk fat with encapsulated WGO.