A novel topical benzovl peroxide (BP) gelformulation containing liposomal BP was shown to significantly reduce local irritation relative to its nonliposomal BP gel (plain BP gel) preparation and also to improve clinical efficacy (almost twofold) in the treatment of acne. BP liposomes were prepared, optimized, and formulated into a carbopol 934gel base. Drug release evaluated using dialysis membrane has repeatedly shown that a new topical gel formulation containing liposomal BP (liposomal BP gel) significantly reduced BP penetration. Clinical evaluation data were also compared with those obtained with liposomal tretinoin (TRE) gel in an earlier investigation of ours. The overall improvement in terms of percentage reduction in total number of skin lesions demonstrated almost similar results for both BP and TRE. However, variation was observed in the treatment of separate types of lesions in which liposomal TRE gel was found to be more effective in treating comedones and liposomal BP gel in treating papules and pustules. Also, the liposomal gel formulation of both the drugs significantly reduced the local adverse effects, thereby improving patient compliance.