Blistered lips with yellow water may be suffering from herpes labialis and secondary to a bacterial infection. Herpes labialis is caused by infection with the herpes simplex virus and can be treated with antiviral medications, such as antiviral oral solution, platyphylline pellets, acyclovir, ganciclovir and famciclovir. You can apply acyclovir ointment to the blisters for topical antiviral treatment when the lips are blistered. If the blisters break down, erode, become pus, and flow yellow water, it indicates a secondary bacterial infection and requires local anti-inflammatory treatment, which can be applied with erythromycin ointment. Herpes labialis occurs when the body’s immunity is low, such as when the seasons change, when you have a cold or flu, or when you stay up late and work hard. For these patients, it is important to drink more water, rest and get enough sleep to enhance the body’s resistance, which will help shorten the course of herpes labialis.