Numerous studies have demonstrated that liposomal encapsulation decreases the life-threatening chronic and acute toxicities of doxorubicin in the face of unaltered or improved antitumor activity. Minimal attention has been paid to the encapsulation effect on the lesser toxicities of the drug, specifically the vesicant properties. In this report we assess the effect of the encapsulation of doxorubicin in an egg-yolk phosphatidylcholine (EPC) cholesterol liposome on the drug's topical toxicity. In addition, to ensure acceptable activity and reduction in toxicity comparable with those of previously assessed formulations, the cardiac and acute toxicities and antitumor activity of the liposomal doxorubicin complex were also investigated. Antitumor efficacy was assessed using the metastatic murine P815 mastocytoma model. Equivalent doses of free and encapsulated doxorubicin possessed the same antitumor activity in the prolongation of animal survival in 14-day survival studies conducted to assess the effect of liposomal encapsulation on the acute toxicity of this drug. The LD50 of liposomal doxorubicin was found to be 40 mg/kg, 53% higher than that of free doxorubicin (26 mg/kg). Histologic examination of cardiac sections taken from DBA/2J mice 7 days after a single i.v. injection of free or liposomal doxorubicin (25 mg/kg) revealed that the liposomal preparation was much less cardiotoxic. In animals receiving the free drug, edema, monocytic infiltration, and cell necrosis were evident. In contrast, those receiving the liposomal preparation demonstrated slight cellular edema but showed no evidence of cellular necrosis. To assess vesicant properties, DBA/2J mice were given a single s.c. injection (0.2 ml) of free or liposomal doxorubicin (2 mg/ml). Those receiving the free drug immediately developed erythema and edema at the injection site, which progressed to ulceration. Those receiving the liposomal complex developed slight erythema and edema but did not ulcerate at any time. All signs of irritation in this group had subsided 3 weeks postinjection. In summary, the liposomal complex used eliminated the vesicant properties of doxorubicin as well as significantly decreasing its cardiac and acute toxicities in the face of unaltered antitumor activity.