The 12% Allium cepa extract topical formulation, with proven clinical benefits, targets improved surgical scar appearance. This study aims to comprehensively assess the physicochemical characteristics and stability of a scar-reducing formulation (15% Allium cepa-micellar extract, 0.01% quercetin). In vitro-release and skin permeation studies were conducted, alongside FTIR and DSC analyses to elucidate the skin permeation mechanism. Quercetin remaining at 25 and 40 °C ranged from 99 to 100% (day 60) and 101 to 104% (day 90), while antioxidant activity (53-65%, day 90) remained comparable to the standard quercetin (84.70% at 40 μg/mL). In the context of in vitro quercetin release, the performances were ranked as shallot-micellar extract > scar-reducing formulation plus shallot-micellar extract > scar-reducing formulation, with no significant differences observed (P < 0.05). Importantly, scar-reducing formulation plus shallot-micellar extract and shallot-micellar extract showed a significant difference (P < 0.05) compared to shallot-water extract and the commercial product. The treated skin showed minor changes in the microstructure compared to untreated skin, indicating a gentle formulation, as observed in the FT-IR spectra and DSC thermograms. The findings from skin permeation mechanism studies imply that the scar-reducing formulation may deposit on the skin surface with minor alterations to the skin microstructure. A crucial consideration for future investigations is a long-term stability assessment of at least 12 months at 30°C, following ASEAN guidelines. The scar-reducing formulation was stable at 25°C, without exceeding 40°C for 90 days. Storage at 4°C is not recommended due to the potential risk of decreased solubility and quercetin precipitation.