A brief introduction to liposomes and the methods of their preparation is presented. Various laboratory-scale and large-scale methods of preparation of liposomes are reviewed. They include some of the recent techniques like the 'bubble' method, microencapsulation, microfluidization, LLC method, ethanol injection, freon injection and detergent dialysis and the traditional methods like hydration, sonication and reverse phase evaporation. This paper also discusses the crucial problems like stability and quality control in the commercialization of liposomes and the methods (such as lyophilization and the various characterization techniques like electron microscopy and gel permeation chromatography) to overcome them, Also discussed is the mechanism of vesicle formation