Transgenic mice bearing the HIV tat gene develop dermal lesions resembling a common malignant tumor in AIDS, Kaposi's sarcoma (KS). To evaluate the permeability characteristics of these lesions and the therapeutic potential of drug-carrying liposomes, we have studied the localization of sterically stabilized liposomes, which show long circulation time in blood and increased accumulation in tumors. Liposomes encapsulating colloidal gold were injected intravenously into transgenic mice bearing KS lesions, and tissues were processed 24 hours later for both electron microscopy and for light microscopy with silver enhancement. Liposomes and silver marker were detected predominantly in the dermis surrounding the early and mature KS lesions, which were characterized by a proliferation of fibroblast-like spindle cells and abnormal blood vessels close to the epidermis. The silver-enhanced gold marker often surrounded vascular channels and scattered erythrocytes. As determined by electron microscopy, some spindle cells and macrophages had ingested intact liposomes. Transendothelial transport of liposomes was observed both through open channels between endothelial cells and also through endothelial cells lining intact vessels. Both extravasation and transcytosis of liposomes through irregular endothelium were much higher in KS lesions than in the adjacent normal skin. The high accumulation of sterically stabilized liposomes in KS lesions and their intracellular uptake by some spindle cells enhances their potential as carriers of chemotherapeutic agents against this neoplasm.