Lipid based vesicular drug delivery system, one of the emerging technologies designed for addressing the delivery challenges of conventional drug delivery methods, has widespread applications in chemotherapeutics, immunotherapeutics, recombinant DNA technology, membrane biology and also as a diagnostic tool in different biological field. The enclosed phospholipid bilayer spherical structure, typically known as liposome, is a versatile vesicular delivery system to carry hydrophilic/hydrophobic drug generally efficiently to the site of action leading to reduced non-specific toxicity and improved bioavailability of the therapeutic moiety. Efficacy of drug encapsulated in liposome depends mainly on the circulation amount of liposome and its residence time, in vivo drug release, drug accumulation in the target site and uptake of the formulation in the reticuloendothelial system. Liposomal formulation factors that dictate those actions are liposomal size (hydrodynamic diameter), surface charge, lipid composition and steric stabilization. Variation in liposomal size shows around 100 fold alterations in pharmacokinetic parameters and systemic activity while the other factors such as surface charge, lipid composition and steric stabilization bring only about 10 fold changes in those properties. The findings indicate the critical role of vesicular size in liposomal efficacy. In the present review the effect of size-variation of liposome on systemic activity of drug as well as its pharmacokinetic profile will be discussed to understand the rational designing of liposomal preparation to maximize therapeutic activity of a drug at desired magnitude and to provide a wide range of product applications such as immunological vaccines, chemotherapy, antimicrobial therapy etc.