The purpose of this investigation was to develop a Hydrogel Based Microemulsion of Valacyclovir hydrochloride for Topical Drug carrier system for Herpis Simplex, Chicken-Pox and Cold sores with aim to get maximum bioavailability and better patient compliance. On the basis of solubility in various oils, surfactants and cosurfactant, Iso Propyl Myristate, Span 20 and DMSO selected as the components of micro-emulsion system.Pseudoternary phase diagrams were constructed to identify the micro-emulsion region and a suitable mixture of surfactant and co-surfactant was identified to formulate the micro-emulsion. Water titration method is used for the construction of phase diagrams. The prepared micro-emulsions were evaluated for drug content, zeta potential, viscosity, Refractive index, globule size, pH, Drug release etc. SEM studies were also carried out of the prepared micro-emulsions.Micro-emulsions have lower viscosity and are difficult to apply on skin so for the ease of application they are tried to be gelled with 1% w/w Carbopol 934 is used as gelling agent. Optimized microemulsion selected on the basis of drug release study and prepared hydrogel based micro-emulsion further evaluated for homogenicity, pH, grittiness, Drug content and Stability studies. In vitro Drug release of prepared microemulsions was observed to follow Zero order kinetics. ME5 formulation is seleced as best formulation on the basis of drug release in 8 hr 96.38% and Zeta potential -48±0.041 mv. Optimized ME5 formulation converted into hydrogel which showed drug release in 12 hr 94.85±0.202 % and and found to be stable for 3 month.