Capsaicin has been used as a topical treatment for skeletomuscular and neuropathic pain. However, it has some side effects when it is applied to the skin such as burning, erythema, and skin irritation resulting in poor patient compliance. These adverse effects are caused by the rapid penetration of capsaicin into the outer layer of the epidermis and low permeation to the dermis layer. This study aimed to develop nanostructured lipid carriers (NLCs) embedded transdermal patches for improved transdermal delivery of capsaicin. An optimum formulation of NLCs (0.3% capsaicin) with a particulate size smaller than 200 nm, narrow size distribution, and acceptable colloidal stability was used for preparing transdermal patches. Polyacrylic acid (7%) was employed as the polymer base of the transdermal patches as it provided high adhesive performance and a sustained release of capsaicin. Moreover, the patches containing capsaicin-loaded NLCs could offer a higher deposition of capsaicin in the deeper layer of the skin compared to the conventional capsaicin patches. In vivo skin irritation studies indicated that the conventional capsaicin patches can cause skin irritation and redness, whereas capsaicin NLCs-loaded patches exhibited lower skin side effects. Therefore, the capsaicin NLCs-loaded patches could be a potential delivery system of capsaicin through the skin with possibly reduced skin irritation.