There have been several attempts published in the literature related with orally effective insulin formulations, which are increasing in popularity. Some of the results indicate that it is possible to reduce blood glucose level by orally administered liposomal insulin formulations, but there is general need to understand the mechanism and effective components of the liposome formulations. In our study, liposomal insulin formulations were prepared using insulin (Humulin R) or protamine-containing insulin (Humulin N) with cholesterol, dipalmitoyl phosphatidylcholine (egg) (DPPC)-cholesterol mixture, and mucoadhesive agent (methyl cellulose, MC)-added DPPC-cholesterol mixture. A tablet formulation of insulin was also prepared. Formulations of liposomal insulin were introduced to mice and rats orally and reduced blood glucose levels were observed. The composition of phospholipid (DPPC, cholesterol and MC mixture) was found to be quite effective in reducing blood glucose levels. The pH of the solution and the presence of the protamine sulfate were found to be important. The application site was also found to be important because liposomal insulin formulations administered through the mouth or esophagus resulted in reduced blood glucose levels. Reduced blood glucose levels were also observed when tablet formulations of insulin were administered to rats orally.