In this protocol, we describe a recently developed on-chip microfluidic method to form monodisperse, cell-sized, unilamellar, and biocompatible liposomes with excellent encapsulation efficiency. Termed octanol-assisted liposome assembly (OLAOLAOLA), it resembles bubble-blowing on a microscopic scale. Hydrodynamic flow focusing of two immiscible fluid streams (an aqueous phase and a lipid-containing 1-octanol phase) by orthogonal outer aqueous streams gives rise to double-emulsion droplets. As the lipid bilayer assembles along the interface, each emulsion droplet quickly evolves into a liposome and a 1-octanol droplet. OLAOLAOLA has several advantages as compared with other on-chip techniques, such as a very fast liposome maturation time (a few minutes), a relatively straightforward and completely on-chip setup, and a biologically relevant liposome size range (5-20 μm). Owing to the entire approach being on-chip, OLAOLAOLA enables high-throughput liposome production (typical rate of tens of Hz) using low sample volumes (~10 &mul). For prolonged on-chip experimentation, liposomes are subsequently purified by removing the 1-octanol droplets. For device fabrication, a reusable silicon template is produced in a clean room facility using electron-beam lithography followed by dry reactive ion etching, which takes ~3 h. The patterned silicon template is used to prepare polydimethylsiloxane (PDMS)-based microfluidic devices in the wet lab, followed by a crucial surface treatment; the whole process takes ~2 d. Liposomes can be produced in ~1 h and further manipulated, depending on the experimental setup. OLAOLAOLA offers an ideal microfluidic platform for diverse bottom-up biotechnology studies by enabling creation of synthetic cells, microreactors and bioactive cargo delivery systems, and also has potential as an analytical tool.