Ethosomes are the ethanolic phospholipid vesicles which are used mainly for transdermal delivery of drugs. Ethosomes have higher penetration rate through the skin as compared to liposomes hence these can be used widely in place of liposomes. The increased permeation of ethosomes is probably due to its ethanolic content. Ethanol increases the cell membrane lipid fluidity which results in increased skin penetrability of the ethosomes. These ethosomes permeates inside the skin and fuse with cell membrane lipids and release the drug. Hot and cold methods are used for formulation of ethosomes. Evaluation parameters include size, shape, drug content, zeta potential etc. Ethosomes have been successfully evaluated for the delivery of many drugs for e.g. Cyclosporine A, insulin, salbutamol etc. Ethosomes can be important drug delivery tool in the future.