Hypertrophic scars and keloids are characterized by an excessive collagen deposition. The available treatment options are invasive and can result in recurrence of scar formation. Using liposomes and transferosomes for the topical delivery of papain, a proteolytic enzyme, can be effective treatment. The objective of the study is to formulate papain-loaded liposomes and transferosomes, characterize the formulations, and study in vitro permeation using shed snake skin and Sprague-Dawley rat skin as models for stratum corneum and full thickness skin. Papain-loaded liposomes and transferosomes were formulated using the thin-film hydration method for the delivery of papain across the stratum corneum barrier. An in vitro permeation study carried out using shed-snake skin and Sprague-Dawley rat skin models showed that transferosomes were able to deliver papain across the stratum corneum barrier, while papain solution and papain liposomes were not able to cross the barrier. However, transferosomes were not able to deliver papain across the full thickness rat skin model suggesting the deposition of papain loaded transferosomes in the epidermal or dermal layer of skin. In addition, an ex-vivo model was used to analyze the effect of papain exposure on the morphology of the epidermis taken from rat skin exposed to papain solution, papain in transferosomes and papain in liposomes. Papain in solution resulted in a noticeable degradation of the epidermis, but when embedded in either transferosomes or liposomes there was no noticeable change when compared to control animals. The cytotoxicity study performed using HeLa cells showed that the cells were viable at papain concentrations lower than 0.01 mg/ml.