This work describes a novel carrier for enhanced skin delivery, the ethosomal system, which is composed of phospholipid, ethanol and water. Ethosomal systems were much more efficient at delivering a fluorescent probe to the skin in terms of quantity and depth, than either liposomes or hydroalcoholic solution. The ethosomal system dramatically enhanced the skin permeation of minoxidil in vitro compared with either ethanolic or hydroethanolic solution or phospholipid ethanolic micellar solution of minoxidil. In addition, the transdermal delivery of testosterone from an ethosomal patch was greater both in vitro and in vivo than from commercially available patches. Skin permeation of ethosomal components, ethanol and phospholipid, was demonstrated in diffusion-cell experiments. Ethosomal systems composed of soy phosphatidylcholine 2%, ethanol 30% and water were shown by electron microscopy to contain multilamellar vesicles. 31P-NMR studies confirmed the bilayer configuration of the lipids. Calorimetry and fluorescence measurements suggested that the vesicular bilayers are flexible, having a relatively low T(m) and fluorescence anisotropy compared with liposomes obtained in the absence of ethanol. Dynamic light scattering measurements indicated that ethanol imparted a negative charge to the vesicles. The average vesicle size, as measured by dynamic light scattering, was modulated by altering the ethosome composition. Experiments using fluorescent probes and ultracentrifugation showed that the ethosomes had a high entrapment capacity for molecules of various lyophilicities.