Introduction: Cancer is a term used for diseases in which abnormal cells divide without control and are able to invade other tissues. Gemcitabine is new cytotoxic drug but some of limitations while its use likes it suppress the activity of Bone marrow i.e. effect on blood forming cells, lower half life-7-18 min.unable to deliver by oral & other route. Higher dose-1000-1250 mg/m2 require against malignancies. Effective against various solid tumor like colon, lungs, breast etc. Several attempt was made to enhance efficacy of gemcitabine against tumor including novel stealth liposomal technology might proves to avoids above limitation. Method: A present investigation focuses on to enhance encapsulation of gemcitabine inside the vesicle by adopting pH gradient methods followed by solvent evaporation. The resulting formulation of liposomes are characterize by vesicle size, zeta potential by zeta sizer along with encapsulation efficiency by centrifugation. The optimization of formulation was carried out by statistically by 32 factorial design. The optimized formulation further subjected for in vitro antitumor activity i.e. cell line study and in vivo performance by using animal model. Results: The stealth liposomal formulation comparatively evaluated with conventional liposomes and pure drug based on cell line study proves that stealth liposomes are effectively retarding the % tumor cell growth than others. Bio distribution profile of stealth liposomes in various organs assure for prolong circulation half of formulation and maximum tumor concentration of drug even after 24 hrs study. There is no sign of toxicity after administration supported by data obtained through toxicity studies. Conclusion: The final outcomes of research was antitumor activity of gemcitabine improved by PEGylation (stealth) technology which also minimize unwanted toxicities associated with gemcitabine via other route of administration.