The purpose of study is to formulate and evaluate ufasomal gel of dexamethasone. Ufasomal suspension was made by sonication method using different concentrations of Span 80, Span 20 and cholesterol along with 25 mg of drug. Ufasomal gel was formulated by hydration method using carbopol 940. Ufasomal vesicles appeared as spherical and multilamellar under Transmission Electron Microscope. Ufasomal formulation prepared with drug to oleic acid molar ratio 8:2 (UF-2) produced greater number of vesicles and greater entrapment efficiency. UF-2 was optimized for further evaluation. The transdermal permeation and skin partitioning of from optimized formulation was significantly higher (P < 0.05) as compared to plain drug and plain gel formulation which is due to presence of surfactant acting as permeation enhancer. Permeation of optimized formulation was found to be about 4.7 times higher than plain drug gel. Anti-inflammatory activity evaluated by inhibition Carrageenan induced rat paw edema model. Significant reduction of edema (P < 0.10) was observed in comparison to the commercial product. Hence oleic acid based vesicles can be used as alternate carrier for topical delivery.