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Challenges associated with topical analgesics and anti-inflammatory drugs include poor drug penetration and retention at the desired lesion site. Therefore, improving these challenges would help to reduce the toxic and side effects caused by drug absorption into the systemic circulation and improve the therapeutic efficacy of topical therapeutic drugs. Pentapeptide (KTTKS) is a signal peptide in skin tissue, it can be recognized and bound by signal recognition particles. In the current study, we successfully prepared novel indomethacin (IMC) loaded KTTKS-modified ethosomes (IMC-KTTKS-Es), and the physicochemical properties and topical efficacy were investigated. Results showed that the prepared IMC-KTTKS-Es displayed a particle size of about 244 nm, a negative charge, good deformability, and encapsulation efficiency (EE) exceeding 80% for IMC, with a sustained release pattern. In vitro percutaneous permeation studies revealed that the skin retention was increased after the drug was loaded in the IMC-KTTKS-Es. Confocal laser scanning microscopy also showed improved skin retention of IMC-KTTKS-Es. In addition, IMC-KTTKS-Es showed improved topical analgesic and anti-inflammatory activity with no potentially hazardous skin irritation. This study suggested that the IMC-KTTKS-Es might be an effective drug carrier for topical skin therapy with a good safety profile.