Nanotechnology, for the past few years, has evolved as a new era of drug delivery for many drug systems. Transdermal drug delivery is one of the few systems which have been a major area of research these days. Transdermal Drug Delivery System (TDDS) offers many advantages as compared to traditional drug delivery systems. However TDDS has limited market success due to the barrier properties of the Stratum Corneum. Introduction of ethosomes, which are soft, malleable vesicular carriers containing ethanol tailored for enhanced delivery of active agents, has initiated a new area on vesicular research for transdermal drug delivery. Different reports show a promising future of ethosomes in making transdermal delivery of various agents more effective. Ethosomes also offer a good opportunity for the non-invasive delivery of small, medium, and large sized drug molecules. Preparation of ethosomes is easy with no complicated equipment involved and therefore can be scaled up to industrial level. This review includes introduction to ethosomes, composition and methods of preparation, evaluation and effectiveness in skin permeation. The review also highlights use of ethosomes in transdermal drug delivery in terms of quantity and depth than either liposomes or hydroalcoholic solutions.