The potential of photoactivating certain molecules, photosensitizers (PS), resulting in photochemical processes, has long been realized in the form of photodynamic therapy (PDT) for the management of several cancerous and noncancerous pathologies. With an improved understanding of the photoactivation process and its broader implications, efforts are being made to exploit the various facets of photoactivation, PDT, and the associated phenomenon of photodynamic priming in enhancing treatment outcomes, specifically in cancer therapeutics. The parallel emergence of nanomedicine, specifically liposome-based nanoformulations, and the convergence of the two fields of liposome-based drug delivery and PDT have led to the development of unique hybrid systems, which combine the exciting features of liposomes with adequate complementation through the photoactivation process. While initially liposomes carrying photosensitizers (PSs) were developed for enhancing the pharmacokinetics and the general applicability of PSs, more recently, PS-loaded liposomes, apart from their utility in PDT, have found several applications including enhanced targeting of drugs, coloading multiple therapeutic agents to enhance synergistic effects, imaging, priming, triggering drug release, and facilitating the escape of therapeutic agents from the endolysosomal complex. This review discusses the design strategies, potential, and unique attributes of these hybrid systems, with not only photoactivation as an attribute but also the ability to encapsulate multiple agents for imaging, biomodulation, priming, and therapy referred to as photoactivatable multiagent/inhibitor liposomes (PMILS) and their targeted versions�targeted PMILS (TPMILS). While liposomes have formed their own niche in nanotechnology and nanomedicine with several clinically approved formulations, we try to highlight how using PS-loaded liposomes could address some of the limitations and concerns usually associated with liposomes to overcome them and enhance their preclinical and clinical utility in the future.