The folate receptor is overexpressed in a broad spectrum of malignant tumors and represents an attractive target for selective delivery of anticancer agents to folate receptor-expressing tumors. This study examines folate-lipid conjugates as a means of enhancing the tumor selectivity of liposome-encapsulated drugs in a mouse lymphoma model. Folate-derivatized polyethylene glycol (PEG3350)-distearoyl-phosphatidylethanolamine was post-loaded at various concentrations into the following preparations: radiolabeled PEGylated liposomes, PEGylated liposomes labeled in the aqueous compartment with dextran fluorescein, and PEGylated liposomal doxorubicin (PLD, Doxil). We incubated folate-targeted radiolabeled or fluorescent liposomes with mouse J6456 lymphoma cells up-regulated for their folate receptors (J6456-FR) to determine the optimal ligand concentration required in the lipid bilayer for liposomal cell association, and to examine whether folate-targeted liposomes are internalized by J6456-FR cells in suspension. Liposomal association with cells was quantified based on radioactivity and fluorescence-activated cell sorting analysis, and internalization was assessed by confocal fluorescence microscopy. We found an optimal ligand molar concentration of approximately 0.5% using our ligand. A substantial lipid dose-dependent increase in cell-associated fluorescence was found in folate-targeted liposomes compared with nontargeted liposomes. Confocal depth scanning showed that a substantial amount of the folate-targeted liposomes are internalized by J6456-FR cells. Binding and uptake of folate-targeted PLD by J6456-FR cells were also observed in vivo after i.p. injection of folate-targeted PLD in mice bearing ascitic J6456-FR tumors. The drug levels in ascitic tumor cells were increased by 17-fold, whereas those in plasma were decreased by 14-fold when folate-targeted PLD were compared with nontargeted PLD in the i.p. model. Folate-targeted liposomes represent an attractive approach for the intracellular delivery of drugs to folate receptor-expressing lymphoma cells and seem to be a promising tool for in vivo intracavitary drug targeting.