Niosome are now widely studied as an alternative delivery system to liposome. An increasing number of non ionic surfactant has been found to form vesicles, capable of entrapping hydrophilic and hydrophobic molecules. In our present study we incorporated Nystatin into niosome by using ether injection method by applying 3 2 factorial design. The niosomes were characterized for size distribution, drug entrapment efficiency, zeta potential and drug release profile. Topical applicability of niosomes was further enhanced by developing niosomal gel formulation using carbomers. Developed niosomal gel was evaluated for pH, spredability, viscosity, drug content, drug release profile and ex vivo deposition study. Microscopic observation and TEM confirmed the uniformity of size and shape and was found to be in the range of 182-219 nm. The entrapment efficiency of the vesicles was determined by ultracentrifugation and was found to be in the range of 62-85%. The release from the niosomal gel was highly prolonged when compared to conventional gel and showed two fold increases in the drug deposition in the skin compared to conventional gel. The stability studies showed that vesicles have greater stability at 4°C followed by 25°C. From the present investigation, it can be concluded that the developed niosomal gel formulation of nystatin has shown great potential in the treatment of fungal infection by providing a prolonged release profile.