Display omitted •Encapsulation increases bioavailability, solubility and stability of phenolic compounds.•Liposomes increase phenolics permeability and skin penetration.•Physicochemical properties of liposomes influence the in vitro and in vivo efficacy of phenolics.•The anti-inflammatory and antioxidant activities downregulate skin related diseases. Phenolic compounds are secondary metabolites present in plants which possess ideal structural characteristics for its antioxidant and anti-inflammatory activity. These compounds are usually stable and bioactive in plants but after the extraction, they are susceptible to degradation as they are very sensitive to light and heat. They are also characterized by having a low solubility, bioavailability and rapid metabolization. In order to increase the compound bioavailability and solubility, liposomes are an efficient way to encapsulate the compounds. This encapsulation prevents the rapid degradation and acts as a control to regulate the release of these compounds. In this review, factors which intervene in the efficacy of liposomes will be shown by in vitro and in vivo assays as the size of liposomes, phase transition temperature, pH, zeta potentials, fluidity of bilayer, charge, bioaccessibility and low toxicity. Also, the cosmetic application of phenolic compounds against diseases will be discussed.