Long-circulating (stealth) liposomes coated with polyethylene glycol (PEG), which show reduced uptake by the reticuloendothelial system (RES) and enhanced accumulation in tumours, were used for conjugation to monoclonal antibodies (MAbs) as a drug-targeting device. A MAb (N-12A5) directed against erbB-2 oncoprotein, a functional surface antigen, was used. Amplification and overexpression of the erbB-2 gene product, being unique to malignancy, confer onto this antibody-mediated therapy high tumour specificity. In vitro binding of [3H]cholesteryl ether ([3H]Chol ether) labelled anti-erbB-2 conjugated liposomes to N-87 cells (erbB-2-positive human gastric carcinoma) was compared with the binding of non-targeted liposomes and indicated a 16-fold increase in binding for the targeted liposomes. No difference in binding to OV1063 cells (erbB-2-negative human ovary carcinoma) was observed. These results indicate highly selective binding of antibody-targeted liposomes to erbB-2-overexpressing cells. Despite increased cell binding, doxorubicin (DOX) loaded in anti-erbB-2-conjugated liposomes did not cause increased in vitro cytotoxicity against N-87 cells, suggesting lack of liposome internalisation. In vivo, the critical factor needed to decrease the non-specific RES uptake and prolong the circulation time of antibody-conjugated liposomes is a low protein to phospholipid ratio ( < 60 micrograms mumol-1). Using these optimised liposome preparations loaded with DOX and by monitoring the drug levels and the [3H]Chol ether label, biodistribution studies in nude mice bearing subcutaneous implants of N-87 tumours were carried out. No significant differences in liver and spleen uptake between antibody-conjugated and plain liposomes were observed. Nevertheless, there was no enhancement of tumour liposome levels over plain liposomes. Both liposome preparations considerably enhanced DOX concentration in the tumour compared with free drug administration. Therapeutic experiments with N-87 tumour-bearing nude mice indicated that anti-tumour activity of targeted and non-targeted liposomes was similar, although both preparations had an increased therapeutic efficacy compared with the free drug. These studies suggest that efficacy is dependent on drug delivery to the tumour and that the rate-limiting factor of liposome accumulation in tumours is the liposome extravasation process, irrespective of liposome affinity or targeting to tumour cells.