The present investigation deals with liposomes. Liposomes are effective in extending the duration of action of drug. In the present study liposomal formulations containing Metformin hydrochloride were prepared and studied. Because of its shorter plasma half-life (t1/2=1.5 h) frequent administration by the patient is necessary to maintain steady state plasma concentration. Designing of controlled release formulation is necessary to maintain steady state plasma concentration for longer period of time and to reduce the frequency of administration. So, an attempt was made to formulate liposome of Metformin hydrochloride to sustain its action. Liposome were prepared using film hydration technique using varying concentrations of Soya lecithin and cholesterol and optimize the ideal combination for required drug release. Liposomal formulations were evaluated for Partical size, Percentage yeild, % entrapment efficiency, SEM, FTIR, DSC, In vitro drug release and Accelerated stability studies. The prepared liposomes were rigid, intact and fulfilled all official requirements. The results of in vitro drug release studies showed that release from liposomal formulation was slow and sustained for 7 hrs period. The formulations followed zero order kinetics and release mechanism was non-fickian diffusion from all the formulations. Thus the liposome of Metformin hydrochloride was successfully developed.