Liposomal Encapsulation Technology is the emerging field in the cancer therapy. Cancer therapy has much limitation due to serious adverse drug reaction of current chemotherapy, due to their non-specificity for tumor cells. The high dose of chemotherapeutic agents make them vulnerable to most of the systemic body process thereby affecting them adversely with least affect on the tumor cells. Liposomes proved much benifecial in cancer therapy due to their selective action on the tumor morphology. This selective action of liposomes is possible because of their unique physical characteristics, they act as a carrier for the chemotherapeutic agent making the pathway of drug towards tumor cell for selectively. Liposomes are spherical vesicles made of phospholipid molecule either from plant source or of animal, which on contact with water molecule give rise to structure similar of micelles. On reacting with water phospholipid arrange themselves in a manner to form a core of aqueous region surrounded by a lipid bilayer. These structures help to enclose variety of drug molecules both of hydrophilic or hydrophobic nature. So entrapment of chemotherapeutic agent in liposome avoids their direct contact to other systemic tissue. The other reason is that the resemblance of phospholipid molecule to the human cell which is primarily composed of phospholipids. The current liposome therapy is undergoing massive research for many cancer agents.