As is known, many antioxidants from plant extracts have been used as additives in skincare products to prevent skin damage following overexposure to environmental pollutants. 7,3',4'-trihydroxyisoflavone (734THIF), an isoflavone compound, possesses various biological activities, including antioxidant, antityrosinase, photodamage protection, and anticancer effects. Unfortunately, 734THIF has poor water solubility, which limits its skin penetration and absorption, and subsequently influences its biological activity. The aim of the present study was to investigate the mechanisms for the improvement in water solubility and skin penetration of 2-hydroxypropyl-β-cyclodextrin (HPBCD) inclusion complex with 734THIF (5-7HP). We also determined its photostability, antipollutant activity in HaCaT keratinocytes, and moisturizing effect in human subjects. Our results showed that 734THIF was embedded into the lipophilic inner cavity of HPBCD and its water solubility and skin penetration were thereby improved through amorphous transformation, surface area enhancement, and hydrogen bonding formation between 734THIF and HPBCD. In addition, 5-7HP inhibited PM-induced ROS generation and then downregulated ROS-mediated COX-2 and MMP9 production and AQP-3 consumption by inhibiting the phosphorylation of MAPKs. Consequently, we suggest that 5-7HP is a safe and photostable topical ingredient to enhance the skin penetration of 734THIF and skin hydration, and therefore 5-7HP may be used as an antipollutant additive in skin care products.