This review outlines the applications of liposomal formulations in ophthalmology. In ophthalmology, liposomes have been used to treat disorders of both the anterior and posterior segments. These include dry eyes, keratitis, corneal transplant rejection, uveitis, endophthalmitis, and proliferative vitreoretinopathy. Liposomes also have shown promise as vectors for genetic transfection and monoclonal antibody-directed vehicles. Furthermore, heat-activated liposomes have spurred research in focal laser and heat-induced release of liposomal drugs and dyes for selective drug delivery. These techniques have been useful in selective tumor and neovascular vessel occlusion, angiography, and retinal and choroidal blood-flow studies. Although verteporfin is the only liposomal drug currently approved for use in the eye, the benefits of liposomes will likely be applied widely in all treatment, diagnostic, and research aspects of ophthalmology in the future.