Previously, we have proposed mupirocin-in-liposomes-in-hydrogel delivery system as advanced delivery system with the potential in treatment of burns. In the current studies, we evaluated the system for its cytotoxicity, ability to prevent biofilm formation, act on the mature biofilms, and finally determined its potential as wound treatment in in vivo mice burn model. The system was found to be nontoxic against HaCaT cells, that is, keratinocytes. It was safe for use and exhibited antibiofilm activity against S. aureus biofilms, although the activity was more significant against planktonic bacteria and prior to biofilm formation than against mature biofilms as shown in the resazurin and the crystal violet assays. An in vivo mice burn model was used to evaluate the biological potential of the system and the healing of burns observed over 28 days. The in vivo data suggest that the delivery system enhances wound healing and is equally potent as the marketed product of mupirocin. Histological examination showed no difference in the quality of the healed scar tissue, whereas the healing time for the new delivery system was shorter as compared to the marketed product. Further animal studies and development of more sophisticated in vivo model are needed for complete evaluation.