Cationic liposomes mediate efficient transfection of mammalian cells, but the manner in which cells internalize and process cationic liposome-DNA complexes has not been well characterized. We exposed several cell types, including human and murine erythroleukemia cells. African green monkey kidney cells (CV-1), isolated rat alveolar type II cells and alveolar macrophages to DNA-cationic liposome complexes containing N-(1-2,3-dioleyloxypropyl)-N,N,N-triethylammonium (DOTMA) and Dioleylphosphatidylethanolamine (DOPE). The morphology of liposome-cell interactions was assessed by electron microscopy. Liposome preparations were complexed to colloidal gold particles or to both plasmid DNA and gold particles. Cells treated with DOTMA liposome-DNA complexes demonstrated endocytosis of the liposome-DNA complexes in coated pits, which were seen in early endosomes, late endosomes, and lysosomes. In isolated alveolar type II cells, the gold-labelled DOTMA lipid apparently mixed with the contents of lamellar bodies. In most cells, gold particles were dispersed throughout the cytoplasmic matrix. In a small proportion of CV-1 and U937 cells, a membrane system resembling the endoplasmic reticulum developed within the nucleus. This novel structure was also present in nuclei after they were isolated from CV-1 cells and then mixed with DOTMA-containing liposomes. Membranes which form after exposure to DOTMA-containing liposomes were 10 nm in thickness as compared to the approx. 8 nm thickness of endogenous cellular membranes. Based on these morphologic observations, we propose that the main route of entry of cationic liposomes into cells is by endocytosis. In some instances, the endosomal compartment releases its cationic liposome-DNA contents into the cytoplasmic matrix. Occasionally, liposomes may enter the nucleus by fusion with the nuclear envelope, creating vesicular and reticular intranuclear membranes. It is not clear at present which, if any of these morphological observations correlates with transfection mediated by cationic liposomes.