Dexamethasone Sodium Phosphate (DSP) is a water soluble anti-inflammatory steroid commonly used in the therapy of serious types of ophthalmic inflammation. It has been demonstrated that unless the corneal epithelium is damaged, DSP is poorly absorbed by the cornea (Kupferman et al. 1974). Thus, it is doubtful whether such a drug would cure inflammation of the anterior segments. For this purpose, several liposomal DSP formulations containing phospholipid: charge inducer: cholesterol in molar ratios of 10;1:4 were investigated. Both gel state (PL 90H: SA: Chol) and liquid state (PL 100:SA:Chol) liposomes were prepared. For the preparation of liposomes, the film method followed by bath sonication was used. Liposomes were labelled with (99)m-Tc and administered intra-ocularly to New Zealand white rabbits weighing 2.5-3 kg for in vivo experiments. The biodistribution of the labelled liposomes were determined. For this purpose, eye segments (such as cornea, lens, iris, ciliar body, vitreous, aqueous humor, conjuctiva and sclera) and RES organs (such as liver, pancreas, spleen) were removed at fixed time intervals. In the present study, the efficiency of liposomes for the delivery of water-soluble drugs was evaluated in rabbit eyes using DSP as a model drug in different liposomal formulations.