The aim of this study was to develop a nanostructured lipid carrier (NLC)-based hydrogel and study its potential for the topical delivery of 5-fluorouracil (5-FU). Precirol
®
ATO 5 (glyceryl palmitostearate) and Labrasol
®
were selected as the solid and liquid lipid phases, respectively. Poloxamer 188 and Solutol
®
HS15 (polyoxyl-15-hydroxystearate) were selected as surfactants. The developed lipid formulations were dispersed in 1% Carbopol
®
934 (poly[acrylic acid]) gel medium in order to maintain the topical application consistency. The average size, zeta potential, and polydispersity index for the 5-FU-NLC were found to be 208.32±8.21 nm, −21.82±0.40 mV, and 0.352±0.060, respectively. Transmission electron microscopy study revealed that 5-FU-NLC was <200 nm in size, with a spherical shape. In vitro drug permeation studies showed a release pattern with initial burst followed by sustained release, and the rate of 5-FU permeation was significantly improved for 5-FU-NLC gel (10.27±1.82 μg/cm
2
/h) as compared with plain 5-FU gel (2.85±1.12 μg/cm
2
/h). Further, skin retention studies showed a significant retention of 5-FU from the NLC gel (91.256±4.56 μg/cm
2
) as compared with that from the 5-FU plain gel (12.23±3.86 μg/cm
2
) in the rat skin. Skin irritation was also significantly reduced with 5-FU-NLC gel as compared with 5-FU plain gel. These results show that the prepared 5-FU-loaded NLC has high potential to improve the penetration of 5-FU through the stratum corneum, with enormous retention and with minimal skin irritation, which is the prerequisite for topically applied formulations.