Understanding the cellular target structure and thereby proposing the best delivery system to achieve sustained release of drugs has always been a significant area of focus in biomedical research for translational benefits. Specific targeting of the receptors expressed on the target cell represents an effective strategy for increasing the pharmacological efficacy of the administered drug. Liposomes offer enhanced conveyance as a potential carrier of biomacromolecules such as anti-cancer proteins, drugs and siRNA for targeting tumour cell death. Commonly used liposomal constructs for various therapies are Doxil, Myocet, DepoCyt and Abraxanes. However, recent strategy of using multifunctional liposomes for the sustained release of drugs with increased plasma residence time and monoclonal antibody-based targeting of tumours coupled with imaging modalities have attracted enormous scientific attention. The ability of liposomes coated with specific ligands such as Apo-E derived RGD R9 and Tat peptide, to reverse the conceptualisation of drug resistance and cross the blood brain barrier, provides promising future for their use as an efficient drug delivery system. By outlining the recent advancements and innovations in the established concept of liposomal drug delivery, this review will focus on the multifunctional liposomes as an emerging novel lipid based drug delivery system.