Henna (Lawsonia inermis L.) leaves have been widely used as a natural plant colorant for hair dyeing and body art. However, the utilisation of henna dye extract in commercial colour cosmetics is compromised by its potential harmful effects to humans. This study demonstrates that spray-drying encapsulation using maltodextrin and gum arabic as biocompatible polymeric carriers can be used as a promising strategy to detoxify henna dye extract while maintaining its hair dyeing efficiency for cosmetics. Henna extract-loaded microcapsules with an average particle size of 4.1 μm were prepared with an excellent encapsulation efficiency (98.4%) and a negative zeta potential (−34.4 mV). The morphology and physicochemical properties of the microcapsules were characterised by comparison with a spray-dried sample of neat henna extract. The in vitro toxicological results showed that the microencapsulation process significantly reduced the contact toxicity of henna extract towards human epidermal keratinocytes as well as to the eyes and skin. The encapsulated henna extract also exhibited improved storage stability at three different temperatures (4, 25 and 50°C) for 14 days. Furthermore, the microcapsules demonstrated satisfactory hair dyeing efficiency as natural colorants with good colour fastness towards light and washing.