The overall goal of our research was to design a vector for efficient delivery of therapeutic genes/drugs to brain. Specifically, this research work was focused on designing PEGylated liposomes surface modified with the receptor targeting protein, transferrin and cell penetrating peptides (CPPs) for targeting and improving the delivery of desired therapeutic agent to brain. Various CPPs including poly-L-arginine, TAT, Penetratin and Mastoparan were investigated for their influence on transport of transferrin receptor targeted liposomes across brain endothelial cells. The dual-modified liposomes were synthesized using thin film hydration and post-insertion technique. The biocompatibility of the liposomes was evaluated at increasing concentrations to obtain an optimum value for safe and effective delivery of drugs or genes. The liposomes showed excellent cellular, blood and tissue compatibility at the optimized concentration. In addition, the combination of targeting ligand transferrin and CPPs resulted in considerable translocation of the therapeutic agent across cellular and brain endothelial barriers both in vitro and in vivo. Among different Tf-CPP liposomes, the Tf-Penetratin liposomes showed maximum translocation of the drug across the brain endothelial barrier (approximately 15% across in vitro and 4% across in vivo BBB) and efficient cellular transport of the encapsulated drug (approximately 90-98%) in various cell lines. In addition, Tf-poly-L-arginine and Tf-Penetratin liposomes showed improved transfection efficiencies in various cell lines. The Tf-Penetratin and Tf-TAT liposomes demonstrated excellent cellular biocompatibility and no hemolytic activity upto 200nM phospholipid concentration. In vivo efficacy of the liposomes was evaluated by performing biodistribution studies in in adult Sprague Dawley rats. The liposomes were intended for delivery of small molecule drug, doxorubicin and pDNA to brain. The dual modified liposomes showed significantly (p<0.05) higher transport of encapsulated agents in rat brain as compared to single ligand (Tf) or plain liposomes. Histological examination of the tissues, from various organs, did not show any signs of toxicity including necrosis, inflammation, fibrosis etc. The study underlines the potential of bifunctional liposomes as high-efficiency and low-toxicity gene delivery system for the treatment of central nervous system disorders.