The development of novel excipients with enhanced functionality has been explored using particle engineering by co-processing. The aim of this study was to improve the functionality of tapioca starch (TS) for direct compression by co-processing with gelatin (GEL) and colloidal silicon dioxide (CSD) in optimized proportions. Design of Experiment (DoE) was employed to optimize the composition of the co-processed excipient using the desirability function and other supporting studies as a basis for selecting the optimized formulation. The co-processed excipient (SGS) was thereafter developed by the method of co-fusion. Flow and compaction studies of SGS were carried out in comparison to its parent component (TS) and physical mixture (SGS-PM). Tablets were prepared by direct compression (DC) containing ibuprofen (200 mg) as a model for poor compressibility using SGS, Prosolv®, and StarLac® as multifunctional excipients. The optimized composition of SGS corresponded to TS (90%), GEL (7.5%), and CSD (2.5%). The functionality of SGS was improved relative to SGS-PM in terms of flow and compression. Tablets produced with SGS were satisfactory and conformed to USP specifications for acceptable tablets. SGS performed better than Prosolv® in terms of disintegration and was superior to StarLac with respect to tensile strength and disintegration time. The application of DoE was successful in optimizing and developing a starch-based co-processed excipient that can be considered for direct compression tableting.