Nanotechnology has immensely contributed to the development of targeted drug delivery system through liposome incorporation techniques in cosmetics. Liposomes are small spherical vesicles consisting of amphiphillic lipids enclosing an aqueous core. Particle size of liposome ranges from 20nm-1000nm. In order to pursue optimal drug action and to avoid side effects other complications associated with conventional dosage forms, liposomes were prepared to transport the drug to the site of action. Liposomes are biocompatible, biodegradable and non immunogenic. Liposomes are not only used as a carrier but also as a sustained drug delivery system for topical application. Liposomes are found to enhance penetration of drug through skin, helps to incorporate active drugs into the product, thereby improving its efficacy and to achieve the desired targeted effect. Ketoconazole is reported to be antiandrogenic and antifungal drug therefore can be used in various cosmetic preparations. The objective of this work is the encapsulation of ketaconazole in liposomes for sustained release topical drug delivery eg. for acne treatment may be beneficial for cosmetic industry.