Lipospheres of carbamazepine were prepared by melt dispersion technique using Precifac ATO 5 in the various drug-lipid ratios. The resulting free-flowing lipospheres were evaluated with respect to surface morphology, particle size distribution, encapsulation efficiency, and in vitro release behavior. The effect of druglipid ratio, the surfactant added, emulsion stabilizer, and stirring speed also were identified as the key variables affecting the formation of discrete spherical lipospheres and drug release rate. The preparation conditions were optimized by using 0.4% w/v span 20 (Hydrophilic-Lipophilic Balance, HLB = 8.6) as a surfactant and 1% w/v gelatin solution as a stabilizer in presence of a high level of water. We found that the ratio of drug to lipid affects the size of the spheres. The incorporation efficiency was found to be high at all loadings. Increasing the lipid:drug ratio produced more spherical, smooth, and round lipospheres. All the prepared lipospheres exhibited slow release profiles dictating the Higuchi mode of release. We saw that the higher the sphere size and the ratio of Precifac, the slower is in vitro drug release.