Galactose and Mannose residues were tagged on the surface of n-glutaryl-phosphatidylethanolamine (NGPE) containing liposomes with and without polyethylene glycol of molecular weight 2000 Da conjugated to distearoyl phosphatidylethanolamine (PEG-2000-DSPE). Biodistribution studies showed that sugar bearing liposomes were cleared more rapidly from circulation than those not bearing the sugar moieties. However, the rate of clearance of glycosylated conventional liposomes was much faster than the sugar bearing sterically stabilized liposomes. Intrahepatic distribution studies showed that a substantial amount of conventional liposomes without sugar residues were taken up by both parenchymal (P) (40%) and non-parenchymal (NP) cells (60%). However, incorporation of PEG-2000-DSPE shifted this uptake slightly in favour of parenchymal cells (47%). While ratio of distribution of galactosylated conventional liposomes to P and NP cells was found to be 74:26, galactosylation of sterically stabilized liposomes further enhanced the affinity of these vesicles towards P cells (P:NP ratio being 93:7). Thus, reduced uptake by Kupffer cells was observed with galactosylated sterically stabilized liposomes as compared to conventional liposomes. Whereas, mannosylation of both the liposomes shifted the distribution towards Kupffer cells in an analogous manner. These findings indicate that sterically stabilized liposomes tagged with galactose residues on their surface are more effective in targeting the entrapped material to hepatocytes as compared to conventional liposomes. This approach can therefore be employed for delivering therapeutic agents like drugs, enzymes, genetic materials, anti-sense oligonucleotides selectively to liver P cells for treatment of hepatic disorders.