This investigation was undertaken to evaluate practical feasibility of site specific pulmonary delivery of liposomal encapsulated Dapsone (DS) dry powder inhaler for prolonged drug retention in lungs as an effective alternative in prevention of Pneumocystis carinii pneumonia (PCP) associated with immunocompromised patients. DS encapsulated liposomes were prepared by thin film evaporation technique and resultant liposomal dispersion was passed through high pressure homogenizer. DS nano-liposomes (NLs) were separated by ultra centrifugation and characterized. NLs were dispersed in phosphate buffer saline (PBS) pH 7.4 containing different carriers like lactose, sucrose, and hydrolyzed gelatin, and 15% L-leucine as antiadherent. The resultant dispersion was spray dried and spray dried formulation were characterized to ascertain its performance. In vitro pulmonary deposition was assessed using Andersen Cascade Impactor as per USP. NLs were found to have average size of 137 +/- 15 nm, 95.17 +/- 3.43% drug entrapment, and zeta potential of 0.8314 +/- 0.0827 mV. Hydrolyzed gelatin based formulation was found to have low density, good flowability, particle size of 7.9 +/- 1.1 microm, maximum fine particle fraction (FPF) of 75.6 +/- 1.6%, mean mass aerodynamic diameter (MMAD) 2.2 +/- 0.1 microm, and geometric standard deviation (GSD) 2.3 +/- 0.1. Developed formulations were found to have in vitro prolonged drug release up to 16 h, and obeys Higuchi's Controlled Release model. The investigation provides a practical approach for direct delivery of DS encapsulated in NLs for site specific controlled and prolonged release behavior at the site of action and hence, may play a promising role in prevention of PCP.