Abstract: It was asserted that the manufacturing of liposomes, which was first disclosed in 1961, was a useful technology for drug encapsulation. Furthermore, there are several cosmetic items on the market now that include liposomes. The liposomes are novel drug carrier systems due to their similarity in lipid composition with the epidermal membrane. As a result, they penetrate the epidermis to a greater extent, showing enhanced skin absorption and increased effectiveness of the encapsulated drug molecule. This review briefly addresses the skin's anatomy, skin conditions, and the topical delivery of drugs for the treatment of skin diseases with emphasis on psoriasis by utilizing liposomes and other vesicular drug delivery systems along with challenges and opportunities in the treatment of skin diseases. When compared to alternative distribution methods, their resemblance to biological membranes enables entry into the epidermal barrier. Liposomes are good at penetrating the skin more deeply and reducing therapeutic side effects, which offers hope for the successful treatment of skin problems. Applying liposomes topically has several benefits, including better skin bioavailability and targeting, increased skin hydration by surface adhesiveness, protection of skin structure from external stress, and prolonged dermal release. Further, they have got potential to target the encapsulated drug molecule into pilosebaceous structure, making them an ideal candidate for the treatment of hair follicles and sebaceous gland disorder.