Due to their cell membrane-mimicking properties, liposomes have served as a versatile research tool in science, from membrane biophysics and drug delivery systems to bottom-up synthetic cells. We recently reported a novel microfluidic method, Octanol-assisted Liposome Assembly (OLA), to form cell-sized, monodisperse, unilamellar liposomes with excellent encapsulation efficiency. Although OLA provides crucial advantages over alternative methods, it suffers from the presence of 1-octanol droplets, an inevitable by-product of the production process. These droplets can adversely affect the system regarding liposome stability, channel clogging, and imaging quality. In this paper, we report a density-based technique to separate the liposomes from droplets, integrated on the same chip. We show that this method can yield highly pure (>95%) liposome samples. We also present data showing that a variety of other separation techniques (based on size or relative permittivity) were unsuccessful. Our density-based separation approach favourably decouples the production and separation module, thus allowing freshly prepared liposomes to be used for downstream on-chip experimentation. This simple separation technique will make OLA a more versatile and widely applicable tool.