Aqueous two-phase systems (ATPSs) are liquid-liquid equilibria between two aqueous phases that usually contain over 70% water content each, which results in a non-toxic organic solvent-free environment for biological compounds and biomolecules. ATPSs have attracted significant interest in applications for formulating carriers (microparticles, nanoparticles, hydrogels, and polymersomes) which can be prepared using the spontaneous phase separation of ATPS as a driving force, and loaded with a wide range of bioactive materials, including small molecule drugs, proteins, and cells, for delivery applications. This review provides a detailed analysis of various ATPSs, including strategies employed for particle formation, polymerization of droplets in ATPS, phase-guided block copolymer assemblies, and stimulus-responsive carriers. Processes for loading various bioactive payloads are discussed, and applications of these systems for drug delivery are summarized and discussed.