The purpose of our work was to develop an ophthalmic delivery system of a flouroquinolone antibiotic, pefloxacin mesylate, based on the concept of ion-activated in situ gelation. Gelrite gellan gum, a novel ophthalmic vehicle, that gels in the presence of mono- or divalent-cations present in the lacrimal fluid, was used as the gelling agent. The developed formulation was compared with marketed eye drops in efficacy of treatment of bacterial conjunctivitis that was induced artificially in rabbits. The formulations were evaluated for rheological characteristics, in vitro release behavior, antimicrobial efficacy, and efficacy against bacterial conjunctivitis. We found that in situ gelling formulations passed the test for sterility. The formulations exhibited a first-order release pattern over 12 hr in in vitro release studies. The developed formulation was effective against selected micro-organisms in antimicrobial efficacy studies. The shelf lives of formulation was >2 years. The formulation demonstrated better therapeutic efficacy compared with standard eye drops because it improved the clinical parameters monitored for prolonged periods. The developed formulations can be considered as a viable alternative to conventional eye drops.