Wound healing, as a normal biological process in the human body, is achieved through four precise and highly programmed phases: hemostasis, inflammation, proliferation, and remodeling. For a wound to heal successfully, all four phases must occur in the proper sequence and time frame. However, many factors can interfere with one or more of these phases, thus causing improper or impaired wound healing. Maintaining a moist wound environment is crucial in facilitating the wound-healing process. The beneficial effects of a moist versus a dry wound environment include re-epithelization, tissue granulation, and repair. The use of hydrocolloid occlusive dressings in maintaining a moist wound environment has proven to be a useful adjunct in facilitating wound healing. Although hydrocolloid dressings have been widely used clinically in wound management, bacterial resistance, poor solubility and sustained drug release remain to be a problem for many of the drugs used in wound therapy. In chronic wound management, where patients normally undergo long treatments and frequent dressing changes, a system that delivers drugs into a wound site in a controlled fashion can improve patient compliance and therapeutic outcomes. Liposomes are small phospholipid vesicles that have been widely investigated as drug carriers for the delivery of therapeutic agents. They are spherical lipid vesicles consisting of phospholipid bilayers that improve the efficacy of the drugs by fusing with biological membranes, and eventually releasing their entrapped content into the cells or bacteria. The aim of this study therefore, is to develop a new bacitracin-based controlled release hydrocolloid dressing, with good absorptive properties for improving the efficacy of antibiotics in wound healing. HPLC (high-pressure liquid chromatography) assay of bacitracin was performed for quantification of the drug. Liposomes were prepared using thin film hydration and extrusion methods. Liposomes were also characterized based on their ideal particle size and encapsulation efficiency, and then incorporated into the different ratios of chitosan/gelatin hydrocolloid films. The films were prepared with increase in gelatin concentration and were evaluated for folding endurance, tensile strength, water absorption capacity, morphology, drug release kinetics, antimicrobial activity and stability. The morphology of these films was found to be very smooth and homogeneous proving a good compatibility between the two polymers. With increase in gelatin concentration, folding endurance, water absorption capacity, tensile strength, drug release kinetics and antimicrobial activity were increased. The antibacterial activity against various bacterial species was improved in the bacitracin loaded hydrocolloid films as compared to the blank films. Based on the findings above, it can be concluded that chitosan/gelatin films at 1:3 proportion is a successful wound dressing for wound management with improved wound healing properties than other formulations. This formulation is a potential candidate for the development of alternative pharmaceutical dosage forms, for the treatment of bacterial infected wounds, based on the activity of the eco-friendly chitosan matrix added to the bacitracin activity. In this work, chitosan also demonstrated a great potential as a dressing for advanced wound therapy and confirmed its good biocompatibility and potential to provide, in combination with liposomes, sustained drug release which is highly beneficial for wound treatment. The addition of gelatin improved the water affinity of the films and facilitated water mediated cross-linking process.