Delivery of dyphylline to the skin using liposomes was investigated. Xanthines are inhibitors of cAMP phosphodiesterase and have been considered for treatment of psoriasis. Dyphylline was chosen because of its solubility in water, which should allow for incorporation of higher concentrations within the liposomes. Liposomes containing dyphylline were prepared by a method using sonication. Transmission electron micrography (TEM) visualization showed small particles ranging from 40 to 100 nm, and particle size distribution determined by light scattering showed the vesicles to have an average diameter of 360 nm. The transdermal delivery of free dyphylline and dyphylline incorporated in unilamellar liposomes was measured from polyethylene glycol (PEG), Carbopol gel, a PEG enhancer base, and water. For comparison, similar experiments were carried out with theophylline as well. When the drugs were incorporated in Carbopol gel, a large difference was seen between their fluxes, with free dyphylline having the highest permeation, followed by liposomal dyphylline, and then theophylline. With the PEG enhancer base, a very high permeation of theophylline was observed relative to dyphylline and liposomal dyphylline. From the PEG base, liposomal dyphylline exhibited the lowest skin permeation flux relative to other bases. Using the PEG base for dyphylline incorporated in liposomes, a high skin partitioning of the drug, along with low transdermal permeation, was measured. These results may indicate that the drug is localized in the skin.