The objective of this work was to evaluate liposome-containing gel formulations for the sustained, site-specific delivery of celecoxib (CXB). Liposomes composed of phosphadtidylcholine (and various amounts of cholesterol (Ch) were prepared using thin film hydration and characterized for encapsulation efficiency, vesicle size, and drug-excipient interaction using differential scanning calorimetry and Fourier-transform infrared spectroscopy. The selected liposome formulation was incorporated in different gel formulations: the Ch ratio affected the encapsulation efficiency of the drug, by increasing Ch ratio up until 1:1 the encapsulation efficiency increased. Further increasing the Ch ratio resulted in decreasing encapsulation efficiency. In vitro drug release and skin permeation studies showed sustained release and enhanced permeation compared with gel formulations containing free drug. In the rat paw edema test, the anti-inflammatory activity of the selected liposomal gel formulation was higher and more sustained compared with that of the nonliposomal gel formulation containing free drug. These results suggest that the liposome-containing gels are promising formulations for sustained, site-specific delivery of CXB.