Atopic dermatitis (AD) is a chronic inflammatory skin condition characterized by symptoms such as dry, itchy, reddish-brown, cracked, or scaly skin. Ethosomes, phospholipid nanovesicles, are used for dermal and transdermal delivery of molecules. S.aureus being a predominant microorganism in AD. Objectives: This study was to formulate and evaluate of Beta Sitosterol loaded ethosomes and to check the critical parameters of vesicle size, PDI, Zeta Potential, % Entrapment efficiency, and vesicularmorphology. Beta Sitosterol drug loaded ethosomes incorporated into the gel base and to check various parameters of the gel,such as physical description, viscosity, pH, spreadibility, extrudability, drug content, In-vitrodrugpermeation study(IVPT) and stabilitystudy as per ICH guidelines. Materials and Methods: Ethosomes were prepared by cold method using Beta sitosterol, Soya-lecithin, Cholesterol, Propylene glycol, Methanol, Carbopol 940 and double distilled water respectively. Results and Discussion: We developed a topicalformulation of ethosomes in which drug is incorporated into it and the selected formulations were tested for in-vitro drug release, stability and other critical parameters. The results showed that F4 batch had optimal vesicle size, PDI, Zeta potential, and entrapment efficiency, with the highest drug release profile even after 18 hours. On the basis of our results it confirmed that our prepared ethosome was found to be stable and reproducible. The formulated ethosome gel could be a good dosage form for the treatment of AD. For more authentications we need to asses efficacy and safety on human.