<p>Lipid-based drug delivery systems have progressed from a simple empirical solubilization tool towards a highly precise engineered platform, capable of delivering small drug molecules, biologics and nucleic acids. Despite proven achievements reflected through the success of lipid nanoparticles-based mRNA vaccine and siRNA medicines, wider clinical translation across complex diseases still remains limited by a fragmented classification system, inaccurate IVIVC, scale-up complexity and continuously evolving and highly demanding regulatory frameworks. This review re-evaluates lipid systems by providing a functional reclassification system that directly links formulation design with biological performance and scale-up science. Instead of categorising based on simple lipid composition and structural features, lipid-based drug delivery systems are reclassified based on their primary functional roles inside the biological system. Further, this review assesses methods to strengthen IVIVC for Lipid-based drug delivery systems and how quality-by-design and emerging quality-by-digital-design approaches supported by mechanistic modelling, in-process analytical tools and machine learning can be utilised to produce a smart and robust next generation lipid carrier. Lastly, this review also highlights persistent regulatory and transitional challenges, pointing out major gaps related to standardisation, comparability and late-stage failure.</p> Graphical Abstract <p></p>