Liposomes play a significant role in encapsulation of various bioactive compounds (BACs), including functional food ingredients to improve the stability of core. This technology can be used for promoting an effective application in functional food and nutraceuticals. Incorporation of traditional and emerging methods for the developments of liposome for loading BACs resulted in viable and stable liposome formulations for industrial applications. Thus, the advance technologies such as supercritical fluidic methods, microfluidization, ultrasonication with traditional methods are revisited. Liposomes loaded with plant and animal BACs have been introduced for functional food and nutraceutical applications. In general, application of liposome systems improves stability, delivery, and bioavailability of BACs in functional food systems and nutraceuticals. This review covers the current techniques and methodologies developed and practiced in liposomal preparation and application in functional foods.