A novel "smart" multifunctional drug delivery system was successfully developed to respond to the up-regulated matrix metalloprotease 2 (MMP2) in the tumor microenvironment and improve cancer cell-specific delivery of loaded drugs. The system represents a surface-functionalized liposomal nanocarrier, for which two functional polyethylene glycol (PEG)-lipid conjugates were synthesized and characterized. The functionalized liposome was further modified with the tumor cell-specific antinucleosome monoclonal antibody (mAb 2C5). In the resulting system, several drug delivery strategies were combined in the same nanocarrier in a simple way and coordinated in an optimal fashion. The functions of the nanocarrier include (i) the hydrophilic and flexible long PEG chains to prevent nanocarrier nonspecific interactions and prolong its circulation time; (ii) a nanoscale size of the system that allows for its passive tumor targeting via the enhanced permeability and retention (EPR) effect; (iii) a mAb 2C5 to allow for the specific targeting of tumor cells; (iv) a matrix metalloprotease 2-sensitive bond between PEG and lipid that undergoes cleavage in the tumor by the highly expressed extracellular MMP2 for the removal of PEG chains; (v) cell-penetrating peptide (TATp) triggering of the enhanced intracellular delivery of the system after long-chain PEG removal and exposure of the previously hidden surface-attached TATp. It is shown that such a design can enhance the targetability and internalization of nanocarriers in cancer cells.