In an attempt to achieve post-inhalation modulation of drug release rate, Bhavane et al. have recently proposed a microparticle agglomerate of nano-sized liposomal particles, with the agglomeration process consisting of chemical cross-linkages that are capable of cleavage [Bhavane et al. J. Cont. Rel 93 (2003) 15-28.]. There, the in vitro modulation of release from agglomerated liposomes encapsulating the antibiotic ciprofloxacin was demonstrated. However, the cleaving agents used in the previous studies are not acceptable for in vivo use. In the present work therefore, a new generation of in vivo compatible agglomerated liposomes has been developed. The release rate of encapsulated compounds from these carriers can be modulated by the addition of mild thiolytic cleaving agents such as cysteine. Specifically, an amino terminated PEG conjugate has been successfully synthesized, similar to the conjugate proposed by Zalipsky [Bioconjugate Chemistry, 10 (5) (1999) 703-707.]. This conjugate contains a dithiobenzyl urethane linkage between the lipid and the PEG, cleavable by the addition of cysteine. The amines at the distal ends of the PEG are used to cross-link the liposomes into agglomerates by the addition of a suitable cross-linking agent reactive towards amines. The cross-linkages were cleaved by cysteine at the DTB sites, resulting in changes in the size distribution of the agglomerates, as well as changes in the release rate of the encapsulated drug.