A new method to tailor liposome size and size distribution in a microfluidic format is presented. Liposomes are spherical structures formed from lipid bilayers that are from tens of nanometers to several micrometers in diameter. Liposome size and size distribution are tailored for a particular application and are inherently important for in vivo applications such as drug delivery and transfection across nuclear membranes in gene therapy. Traditional laboratory methods for liposome preparation require postprocessing steps, such as sonication or membrane extrusion, to yield formulations of appropriate size. Here we describe a method to engineer liposomes of a particular size and size distribution by changing the flow conditions in a microfluidic channel, obviating the need for postprocessing. A stream of lipids dissolved in alcohol is hydrodynamically focused between two sheathed aqueous streams in a microfluidic channel. The laminar flow in the microchannel enables controlled diffusive mixing at the two liquid interfaces where the lipids self-assemble into vesicles. The liposomes formed by this self-assembly process are characterized using asymmetric flow field-flow fractionation combined with quasi-elastic light scattering and multiangle laser-light scattering. We observe that the vesicle size and size distribution are tunable over a mean diameter from 50 to 150 nm by adjusting the ratio of the alcohol-to-aqueous volumetric flow rate. We also observe that liposome formation depends more strongly on the focused alcohol stream width and its diffusive mixing with the aqueous stream than on the sheer forces at the solvent-buffer interface.