Liposomes are widely used in the pharmaceutical industry as drug delivery systems to increase the efficacy and reduce the off-target toxicity of active pharmaceutical ingredients (APIs). The liposomes are more complex drug delivery systems than the traditional dosage forms, and phospholipids and cholesterol are the major structural excipients. These two excipients undergo hydrolysis and/or oxidation during liposome preparation and storage, resulting in lipids hydrolyzed products (LHPs) and cholesterol oxidation products (COPs) in the final liposomal formulations. These excipient-related impurities at elevated concentrations may affect liposome stability and exert biological functions. This review focuses on LHPs and COPs, two major categories of excipient-related impurities in the liposomal formulations, and discusses factors affecting their formation, and analytical methods to determine these excipient-related impurities.