Photodynamic therapy is a clinically approved treatment for cancer and noncancer diseases. This modality utilises light-activatable chemicals (photosensitising agents) to capture photons and use light energy for the production of cytotoxic reactive molecular species. Most photosensitisers that are in use clinically or in preclinical development are hydrophobic and tend to aggregate in the aqueous environment, which limits their delivery and photosensitising efficiency. Liposomal delivery of photosensitisers will often overcome or decrease these problems. In addition, as with chemotherapeutic agents, liposomal formulations of photo-sensitising agents may help to achieve better selectivity for tumour tissue compared with normal tissue. Over the past years, liposomal photosensitisers have emerged as therapeutic agents in many experimental studies, and have obtained approval for clinical applications. Recent progress in liposomal technology further opens up the possibility of generating more selectively targeted photosensitisers encapsulated in liposomes. This review will cover progress in the use of liposomal photosensitisers, summarise current liposomal formulations, and project future directions for the liposomal delivery of photosensitising agents.