This study innovatively prepared an effective capsaicin-loaded liposome, a nanoformulation with fewer irritants, for oral administration. The in vitro and in vivo properties of the liposomal encapsulation were investigated and the potential possibility of oral administration evaluated. The liposomal agent composed of phospholipid, cholesterol, sodium cholate and isopropyl myristate was prepared using film-dispersion method. A level A in vitro-in vivo correlation (IVIVC) was established for the first time, which demonstrated an excellent IVIVC of both formulated and free capsaicin in oral administration. Physicochemical characterizations including mean particle size, zeta (ζ) potential and average encapsulation efficiency of capsaicin-loaded liposome were found to be 52.2 ± 1.3 nm, -41.5 ± 2.71 mv and 81.9 ± 2.43 %, respectively. In vivo, liposomal encapsulation allowed a 3.34-fold increase in relative bioavailability compared to free capsaicin. The gastric mucosa irritation studies indicated that the liposomal system was a safe carrier for oral administration. These results support the fact that capsaicin, an effective drug for the treatment of neuropathic pain, could be encapsulated in liposome for improved oral bioavailability. The excellent IVIVC of capsaicin-loaded liposome could also be a promising tool in liposomal formulation development with an added advantage of reduced animal testing.