The objective of this study was to investigate the effect of liposomes on the absorption of water-soluble active pharmaceutical ingredients. Salbutamol sulfate (SBS) has been widely used for treatment of bronchospasm in conditions such as asthma. Using SBS as the model drug in this study, we developed SBS-loaded liposomes for oral administration and explored the relationship between their bioavailability and anti-asthmatic efficacy. SBS was entrapped in liposomes with encapsulation efficiency as high as 70%. The in vitro transport profile of SBS across a dialysis membrane for liposome suspension was compared with that for free SBS solution. Oral administration of liposomes labeled with the fluorescent dye 1,1'-dioctadecyltetramethyl indotricarbocyanine iodide (DiR) in a mouse model was assessed by a small animal imaging system. Pharmacokinetic and pharmacodynamic studies on SBS liposome suspension and free SBS solution were performed using animal models via oral administration. The results showed that liposomes could sustain the release of SBS in vitro and decrease the transport rate of SBS across the dialysis membrane. In vivo fluorescence imaging analysis demonstrated DiR liposome distribution in mouse stomach for at least 24 hr. The mean residence time of SBS from liposomes was found to be longer than that of free SBS, suggesting that the relative bioavailability of SBS was higher when liposome delivery was used. The pharmacokinetic data also showed that the drug absorption rate was relatively slower for treatment with liposomal SBS when compared to free SBS. Moreover, SBS liposome suspension was shown to give a prolonged anti-asthmatic effect after oral administration when compared to free SBS solution. Overall, this study demonstrated that use of liposomes as delivery vehicles for sustained drug release and controlled absorption could be a promising approach for improving the therapeutic potency of active pharmaceutical ingredients.