In recent years, transdermal drug delivery systems have gained considerable attention for their ability to enhance patient compliance and provide consistent drug release. However, the barrier function of the skin’s outermost layer remains the foremost challenge in these systems. As a result, there is a growing interest in the use of ethosomes as a cutting-edge nanocarrier in drug delivery. This review presents the concept and mechanism of action of ethosomes as well as the numerous types and preparation techniques available. It also discusses the significance of characterization methods and how they impact ethosomal properties along with recent advancements and applications in the realm of transdermal drug delivery. Ethosomes exhibit tremendous potential for the pharmaceutical industry, and optimizing preparation methods, performing comprehensive property studies, and exploring their applications are critical areas for future research.