Folic acid, attached to polyethyleneglycol-derivatized, distearoyl-phosphatidylethanolamine, was used to target in vitro liposomes to folate receptor (FR)-overexpressing tumor cells. Confocal fluorescence microscopic observations demonstrated binding and subsequent internalization of rhodamine-labeled liposomes by a high FR-expressing, murine lung carcinoma line (M109-HiFR cells), with inhibition by free folic acid. Additional experiments tracking doxorubicin (DOX) fluorescence with DOX-loaded, folate-targeted liposomes (FTLs) indicate that liposomal DOX is rapidly internalized, released in the cytoplasmic compartment, and, shortly thereafter, detected in the nucleus, the entire process lasting 1-2 h. FR-mediated cell uptake of targeted liposomal DOX into a multidrug-resistant subline of M109-HiFR cells (M109R-HiFR) was unaffected by P-glycoprotein-mediated drug efflux, in sharp contrast to uptake of free DOX, based on verapamil-blockade experiments with quantitation of cell-associated DOX and flow cytometry analysis. Delivery of DOX by FTLs to M109R-HiFR cells increased continuously with time of exposure, reaching higher drug concentrations in whole cells and nuclei compared with exposure to free DOX. The in vitro cytotoxic activity obtained with DOX-loaded FTLs was 10-fold greater than that of the nontargeted liposome formulation, but was not improved over that of free DOX despite the higher cellular drug levels obtained with the targeted liposomes in M109R-HiFR cells. However, if M109R-HiFR cells were exposed to drugs in vitro and tested in an in vivo adoptive assay for tumor growth in syngeneic mice along a 5-week time span, FTL DOX was significantly more tumor inhibitory than free DOX. It is suggested that the biological activity of liposomal DOX released inside the cellular compartment is reduced in vitro due to the aggregated state of DOX, resulting from the liposome drug-loading process, and requires a long period of time and/or an in vivo environment for full expression.