5-Fluorouracil (5-FU) is one of the most effective antineoplastic agents used for the treatment of skin cancers and actinic keratosis (AK). Currently commercial formulation for topical 5-FU administration is available in the form of solution or cream. Commercial topical formulations are associated with the limitation of very short retention time at the administration site resulting in very poor skin permeation and deposition of drug. In the present study attempt was made for the preparation, optimization and characterization of bioadhesive gel formulations for localized delivery of 5-FU. Four bioadhesive gel formers, Carbopol 934, Carbopol 980, Methylcellulose (MC) and Poloxamer 188 were selected for the preparation of 5-FU bioadhesive gel formulations. The formulations were characterized for characteristic parameters including bioadhesive strength, skin deposition and interaction study. Carbopol 934 based bioadhesive gel formulation at the concentration of 1.5% w/w showed the best physicochemical properties such as viscosity (2670±12.2 cP), which was similar to the value obtained with the marketed cream (2870±14.4 cP), highest skin deposition (1290±56.4μg) and bioadhesive strength (18.62 gf). Cutaneous irritation of optimized bioadhesive gel formulations was also tested using the Draize test and only very slight erythema and no oedema was observed. In comparison, marketed formulation showed well defined erythema along with oedema formation. The result of the present study demonstrated that formulation of Carbopol 934 based 5-FU bioadhesive gel is a better alternative to the traditional cream base for enhanced topical delivery of 5-FU. The developed formulation will have the ease of application, better skin deposition and sustained release characteristic with reduced skin toxicity.