The entrapment of clofazimine (CLO) in a liposomal delivery system for topical application can protect it from absorption into the blood circulation and increase its residence time within the skin. This may reduce the very long mean period of leprosy treatment, as well as the side effects due to the long term administration of large doses of the drug. This investigation deals with critical parameters controlling the formulation and stabilization of liposomes with encapsulated CLO. The entrapment efficiency of CLO in liposomes was increased by altering the proportion of phosphatidyl choline (PC) and cholesterol (CHOL) in liposomes. The stability of liposomal suspensions and the liposomal gels (HPMC K4M) in terms of retention of CLO was measured at refrigeration temperature (2-8 degrees C), room temperature (25+/-2 degrees C) and body temperature (37 degrees C) for a period of 3 months. The results show that entrapment of CLO in liposomes can be increased by increasing the proportion of PC. However, the optimum encapsulation and retention of CLO was achieved only with a specific PC:CHOL molar ratio (5.13:1.00). An almost identical value of the entrapment efficiency was obtained when gel filtration and ultracentrifugation methods were used to separate the CLO-carrying liposomes from free drug. The effect of vortexing and sonication on the entrapment efficiency gave similar results, although the mean particle size was different. CLO liposomal gels were found to be stable at room temperature for up to 3 months.