The current research work aims to study the pharmacokinetic and nasal ciliotoxicity of donepezil liposome-based in situ gel to treat Alzheimer's disease. The physicochemical properties and first-pass metabolism of donepezil HCl result in low concentrations reaching the brain post oral administration. To overcome this problem, donepezil HCl-loaded liposomes were formulated using the ethanol injection method. The donepezil HCl-loaded liposomes were spherical with a size of 103 ± 6.2 nm, polydispersity index of 0.108 ± 0.008, and entrapment efficiency of 93 ± 5.33 %. The optimized in situ gel with donepezil HCl-loaded liposomes showed 80.11 ± 7.77 % drug permeation than donepezil HCl solution-based in situ gel (13.12 ± 4.84 %) across sheep nasal mucosa. The nasal ciliotoxicity study indicated the safety of developed formulation for administration via nasal route. The pharmacokinetics and biodistribution study of developed formulation showed higher drug concentration (1239.61 ± 123.60 pg/g) in the brain after nasal administration indicating its better potential via the nasal pathway. To treat Alzheimer's disease, the administration of liposome-based in situ gel through the nasal pathway can therefore be considered as an effective and promising mode of drug delivery.