Many targeted cancer therapies require endocytosis of the targeting molecule and delivery of the therapeutic agent to the interior of the tumor cell. To generate single chain Fv (scFv) antibodies capable of triggering receptor-mediated endocytosis, we previously developed a method to directly select phage antibodies for internalization by recovering infectious phage from the cytoplasm of the target cell. Using this methodology, we reported the selection of a panel of scFv that were internalized into breast cancer cells from a nonimmune phage library. For this work, an immunotherapeutic was generated from one of these scFv (F5), which bound to ErbB2 (HER2/neu). The F5 scFv was reengineered with a C-terminal cysteine, expressed at high levels in Escherichia coli, and coupled to sterically stabilized liposomes. F5 anti-ErbB2 immunoliposomes were immunoreactive as determined by surface plasmon resonance (SPR) and were avidly internalized by ErbB2-expressing tumor cell lines in proportion to the levels of ErbB2 expression. F5-scFv targeted liposomes containing doxorubicin had antitumor activity and produced significant reduction in tumor size in xenografted mice compared to nontargeted liposomes containing doxorubicin. This strategy should be applicable to generate immunotherapeutics for other malignancies by selecting phage antibodies for internalization into other tumor types and using the scFv to target liposomes or other nanoparticles.