Abstract Gemcitabine (GEM) is an extensively utilized antineoplastic drug for treating many malignancies, including ovarian, bladder, and pancreatic cancers. Nevertheless, utilization of GEM has been linked to hepatotoxicity, which may limit its use in clinical applications. Quercetin (QUR) is a naturally occurring flavonoid with versatile biological activities, but its therapeutic utility is hindered by poor water solubility and low bioavailability. This study aimed to enhance QUR bioavailability by developing and evaluating different formulations of QUR liposomes (QUR-L). The optimal QUR-L formulation was determined based on various variables including particle size distribution, polydispersity index, zeta potential, entrapment efficiency, and in vitro release. Subsequently, the optimal formulation has been used to treat rats with induced hepatotoxicity upon gemcitabine administration via oral route. Rats were divided into control, QUR-L, GEM, and GEM + QUR-L groups. The rat's liver impairment severity was determined by measuring liver function tests, antioxidant capacity, anti-inflammatory markers, and nuclear factor erythroid–2–related factor–2 (Nrf2)-related gene expression across all groups. According to the findings, QUR-L reduced the severity of GEM-induced hepatotoxicity in rats, as evidenced by enhanced liver function tests and total hepatic antioxidant capacity. Furthermore, QUR-L upregulated mRNA expression of Nrf2 and downregulated expression of hepatic pro-inflammatory mediators such as nuclear factor kappa-light-chain-enhancer of activated β-cells (NF-κB) and tumor necrosis factor-α (TNF-α). Furthermore, QUR-L treatment enhanced the histological status of the hepatic tissue in GEM-treated rats. These findings suggest that QUR-L could serve as a safe and effective substitute for traditional hepatoprotectives in mitigating GEM-induced hepatic injury.