Pulmonary drug delivery system facilitates local instillation of anticancer drugs to lungs which has proven to be pioneering approach for treatment of lung cancer. This approach led the groundwork for delivering liposomal formulation directly to lungs. Gemcitabine-HCl is currently considered as most effective drug for management of lung cancer. However, its application is limited owing to its metabolism by enzymes present in plasma resulting in reduced efficacy and higher toxicity. In present study, lyophilisation technique was used to convert liposomes into dry powder inhaler, which was formulated using emulsification solvent evaporation technique. The physicochemical properties including size, morphology, entrapment efficiency, loading efficiency etc. of formulated liposomes were evaluated. The prepared liposomal DPI (LDPI) formulations were then examined for solid state characteristics and aerosol performance using cascade impactor. From all the formulations prepared, the LDPI formulated using trehalose as cryoprotectant presented required properties along with desirable deposition pattern. Finally, the optimized formulation was selected for in vitro cell line studies; in vivo studies and stability study. This formulated inhalable particles offers a promising approach for the management of lung cancer through regional chemotherapy.