Stable liposomes containing carboxymethyl chitosan (CMC) were prepared and characterized. CMC was introduced in the phosphatidyl choline (PC) liposomes by different methods; firstly, CMC in a free state in the aqueous phase; secondly as a coat (coupled); and finally as a conjugate of dapsone. The stability of liposomes was assessed by their disintegration in ethanol and surfactants. Both hydrophilic bromothymol blue and lipophilic dapsone were encapsulated in these liposomes and their in vitro release studies were carried out at 37 degrees C using different media, namely, phosphate buffer (pH 7.4), 0.02 N-HCl and 1% mouse plasma. The conjugate of dapsone with CMC present in PC liposomes gave the best results in its stability as compared to other modified liposomes. The release data of dapsone also confirmed the results of the stability studies on liposomes. CMC-dapsone conjugate released the dapsone much slower in all three media than did PCCMC and PCCMC-coat liposomes.