Caelyx/Doxil is a novel pegylated liposomal formulation of the first-generation anthracycline, doxorubicin. The pharmacokinetics of this polyethylene-glycol-coated liposome are characterized by a reduced volume of distribution, a long intravascular circulating half-life and slow plasma clearance compared with free doxorubicin. This, coupled with a small vesicular size, uniquely promotes the localization of Caelyx/Doxil at tumor sites and explains its altered toxicity profile. The FDA and EMEA have approved its use for the treatment of AIDS-related Kaposi's sarcoma and, more recently, for recurrent epithelial ovarian cancer (EOC). Numerous investigations have focused on its use in the treatment of metastatic breast cancer, as well as recurrent squamous cell cervical carcinoma, soft tissue sarcoma, squamous head and neck cancers, prostate cancers and malignant gliomas. Ongoing clinical studies of combination regimens incorporating Caelyx/Doxil will further clarify its role in the treatment of advanced solid tumors.