Today considerable consumer interest has risen towards the use of herbal hygienic and cosmetic products. Lavender oil is a well-known essence with uses in the treatment of alopecia, dandruff and scalp hair re-growth, as well as possessing antimicrobial, antiviral and antifungal effects. Hence, this study was undertaken to formulate and assess the efficacy of a new clear liquid hair shampoo containing this essence. Initially, various concentrations of anionic, nonionic and amphoteric surfactants were examined to obtain a suitable and effective cleansing detergent base. Next, the necessary additives were incorporated into the detergent base to obtain the most desirable clear shampoo formulation. Finally, 0.5% lavender essence was included within the shampoo base and then the product underwent various physico-chemical tests as well as assessment of the efficacy and acceptability in twenty volunteers. Following extensive formulation, eventually a clear liquid shampoo containing triethanolaminelauryl sulfate and sodium laurylether sulfate (anionic detergents), coconut diethanolamide (foam builder, stabilizer and hair softener), poloxamer 407 and alkyldimethylaminobetaine (nonionic and amphoteric co-detergents for reducing eye and skin irritation), sodium chloride (viscosity adjusting agent), methyl and propyl paraben (preservatives), BHA (antioxidant), glycerin (conditioner), EDTA (sequestrant) and lavender oil was prepared. This formulation had a clear appearance, pleasant odor, good spreadability, substantivity and skin feel, and a pH of 7.05±0.07. It produced copious amounts of a rich, stable, and durable foam, with desirable washability following use. This shampoo formulation supported no microbial or fungal growth, and remained stable under thermal, mechanical and accelerated stability tests (at 40°C for 6 months). Finally, the efficacy (especially against dandruff), applicability and acceptability of this shampoo was justified and approved by twenty volunteers. The formulated lavender oil containing clear liquid shampoo appears to be a pleasant, acceptable and effective herbal product, particularly suitable against dandruff as well as hair and scalp hygiene.