Human monocytes harvested from healthy donors and separated by discontinuous gradient centrifugation and adherence were highly cytotoxic to allogeneic melanoma cells, but did not affect nontumorigenic cells, as measured by lysis of the cells. After 4 days incubation of these monocytes in medium, they showed little, if any, cytolytic activity. Hydrophilic muramyl dipeptide (MDP) or lipophilic muramyl tripeptide (MTP-PE) was encapsulated within multilamellar (MLV) liposomes composed of phosphatidylserine-phosphatidylcholine. The cultured monocytes were rendered tumoricidal by interaction for 24 hr with MDP or liposomes containing soluble MDP or lipophilic MTP-PE. Moreover, freshly isolated monocytes treated for 24 hr with liposomes containing MDP or MTP-PE remained tumoricidal during culture for up to 5 days. About 1,600-times lower concentration of MDP entrapped in liposomes than of free MDP in the medium was effective for rendering monocytes tumoricidal. Similarly, about 80-times lower concentration of MTP-PE in liposomes than of free MDP was effective for the activation of monocytes. It is concluded that MLV liposomes containing MDP or MTP-PE are far more efficient in potentiating the tumoricidal activity of human monocytes than unencapsulated, free MDP.