The aim of the study was to prepare and evaluate topical gels incorporating liposomes of Dexamethasone base. Multilamellar vesicular (MLVs) liposomes were prepared using thin film hydration method. By subjecting MLVs to sonication using Ultra homogenizer, SUVs were formed. Liposomes were composed of soya lecithin, cholesterol, and dexamethasone. Using these method different concentrations of dexamethasone liposomes were prepared and were successfully incorporated in 1% carbopol gels. Liposomes were characterized for their particle size using zeta sizer and entrapment efficiency by dialysis method. SUVs were evaluated for in vitro release. Viscosity of gel formulations was measured using Brookfield viscometer, Drug lipid compatibility was performed using FTIR spectroscopy. Liposomal gels were evaluated for in vitro release studies, ex-vivo permeation studies and pharmacodynamic studies (Anti-inflammatory activity). Results showed more localized and sustained effect with Liposomal dexamethasone gels than dexamethasone gel formulation.