Targeting of liposomes with phospholipid-anchored folate conjugates is an attractive approach to deliver chemotherapeutic agents to folate receptor (FR) expressing tumors. The use of polyethylene glycol (PEG)-coated liposomes with folate attached to the outer end of a small fraction of phospholipid-anchored PEG molecules appears to be the most appropriate way to combine long-circulating properties critical for liposome deposition in tumors and binding of liposomes to FR on tumor cells. Although a number of important formulation parameters remain to be optimized, there are indications, at least in one ascitic tumor model, that folate targeting shifts intra-tumor distribution of liposomes to the cellular compartment. In vitro, folate targeting enhances the cytotoxicity of liposomal drugs against FR-expressing tumor cells. In vivo, the therapeutic data are still fragmentary and appear to be formulation- and tumor model-dependent. Further studies are required to determine whether folate targeting can confer a clear advantage in efficacy and/or toxicity to liposomal drugs.