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The present investigation aimed at formulation, performance evaluation, and stability studies of new vesicular drug carrier system protransfersomes for transdermal delivery of the contraceptive agent, levonorgestrel. Protransfersome gel (PTG) formulations of levonorgestrel were prepared and characterized for vesicle shape, size, entrapment efficiency, turbidity, and drug permeation across rat skin and were evaluated for their stability. The system was evaluated in vivo for biological assay of progestational activity including endometrial assay, inhibition of the formation of corpora lutea, and weight gain of uterus. The effects of different formulation variables (type of alcohol, type and concentration of surfactant) on transdermal permeability profile were assessed. The optimized PTG formulation showed enhanced in vitro skin permeation flux of 15.82±0.37 μg/cm2/hr as compared to 0.032±0.01 μg/cm2/hr for plain drug solution. PTG also showed good stability and after 2 months of storage there was no change in liquid crystalline nature, drug content, and other characteristic parameters. The peak plasma concentration of levonorgestrel (0.139±0.05 μg/mL) was achieved within 4 hours and maintained until 48 hours by a single topical application of optimized PTG formulation. In vivo performance of the PTG formulation showed increase in the therapeutic efficacy of drug. Results indicated that the optimized protransfersomal formulation of levonorgestrel had better skin permeation potential, sustained release characteristic, and better stability than proliposomal formulation.