Purpose: The aim of this study was to evaluate the effects of formulation composition and methods of preparation on the physico-chemical properties and drug release of naproxen liposome. Methods: The ratio of lipid to drug, lipid to lipid, organic to aqueous phase and methods of preparation were varied. Results: Formulation composed of 0.9 g lecithin:3.6 g cholesterol: 0.9 g cholesteryl hemisuccinate and drug : lipid ratio of 1:3 gave the highest entrapment efficiency (83.6%). Formulations prepared by using different ratios of organic to aqueous phase showed different drug entrapment efficiency depending on the ratio of the volume of the two phases. Also, the method used for preparation of the liposome had an effect on drug entrapment efficiency. The drug release data indicated that liposome prepared by the heating method and composed of 9 g lecithin:3.6 g cholesterol:0.9 g cholesteryl hemisuccinate using a ratio of 3 lipid:1 drug showed the best control release profile. The percent drug released was 14.9% and 71.5% at 15 minutes and 360 minutes of testing dissolution. Original Research Article Lugo and Ghaly; JSRR, 4(4): 292-305, 2015; Article no.JSRR.2015.033 293 Conclusion: The physico-chemical properties, drug entrapment and drug release from naproxen liposome were influenced by formulation composition, ratio of aqueous to organic phase and methods of preparation.