Doxorubicin is the best known and most widely used member of the anthracycline antibiotic group of anticancer agents. It was first introduced in the 1970s, and since that time has become one of the most commonly used drugs for the treatment of both hematological and solid tumors. The therapy-limiting toxicity for this drug is cardiomyopathy, which may lead to congestive heart failure and death. Approximately 2% of patients who have received a cumulative (lifetime) doxorubicin dose of 450-500 mg?m(2) will experience this condition. An approach to ameliorating doxorubicin-related toxicity is to use drug carriers, which engender a change in the pharmacological distribution of the drug, resulting in reduced drug levels in the heart. Examples of these carrier systems include lipid-based (liposome) formulations that effect a beneficial change in doxorubicin biodistribution, with two formulations approved for clinical use. Drug approval was based, in part, on data suggesting that beneficial changes in doxorubicin occurred in the absence of decreased therapeutic activity. Preclinical (animal) and clinical (human) studies showing that liposomes can preferentially accumulate in tumors have provided a rationale for improved activity. Liposomes represent ideal drug delivery systems, as the microvasculature in tumors is typically discontinuous, having pore sizes (100-780 nm) large enough for liposomes to move from the blood compartment into the extravascular space surrounding the tumor cells. Liposomes, in the size range of 100-200 nm readily extravasate within the site of tumor growth to provide locally concentrated drug delivery, a primary role of liposomal formulation. Although other liposomal drugs have been prepared and characterized due to the potential for liposomes to improve antitumor potency of the encapsulated drug, the studies on liposomal doxorubicin have been developed primarily to address issues of acute and chronic toxicity that occur as a consequence of using this drug. It is important to recognize that research programs directed toward the development of liposomal doxorubicin occurred concurrently with synthetic chemistry programs attempting to introduce safer and more effective anthracycline analogues. Although many of these drugs are approved for use, and preliminary liposomal formulations of these analogues have been prepared, doxorubicin continues to be a mainstay of drug cocktails used in the management of most solid tumors. It will be of great interest to observe how the approved formulations of liposomal doxorubicin are integrated into combination regimes for treatment of cancer. In the meantime, we have learned a great deal about liposomes as drug carriers from over 20 years of research on different liposomal doxorubicin formulations, the very first of which were identified in the late 1970s. This chapter will discuss the various methods for encapsulation of doxorubicin into liposomes, as well as some of the important interactions between the formulation components of the drug and how this may impact the biological activity of the associated drug. This review of methodology, in turn, will highlight research activities that are being pursued to achieve better performance parameters for liposomal formulations of doxorubicin, as well as other anticancer agents being considered for use with lipid-based carriers.