Liposomes have been widely applied as carriers of molecules in the fields of nanodevices, drug delivery and gene delivery, as well as a mimic for cell membranes. In the biosensor field, liposomes find special application in signal amplification, due to their excellent carrier properties for encapsulation of signal marker compounds across a wide spectrum of sensing modalities. Additionally, the ability to modify the liposome surface structure to perform recognition functions with a wide range of types of analytes is an important aspect of their use in bioanalysis. This article provides an extensive review of the utility of liposomes in the fields of biosensor and bioanalysis with a focus on these two aspects. The aspects related to the translation of liposomes into commercially viable devices for biosensing are also discussed, and the hurdles to more widespread deployment in point of care systems are addressed.