Hemoglobin and alkaline phosphatase were each encapsulated in phosphatidylcholine liposomes using a dehydration-rehydration cycle for liposome formation. In this method, liposomes prepared by sonication are mixed in aqueous solution with the solute desired to be encapsulated and the mixture is dried under nitrogen in a rotating flask. As the sample is dehydrated, the liposomes fuse to form a multilamellar film that effectively sandwiches the solute molecules. Upon rehydration, large liposomes are produced which have encapsulated a significant fraction of the solute. The optimal mass ratio of lipid to solute is approx. 1:2 to 1:3. This method has potential application in large-scale liposome production, since it depends only on a controlled drying and rehydration process, and does not require extensive use of organic solvents, detergents, or dialysis systems.