Spray-freeze drying was utilized to manufacture a liposomal powder formulation containing ciprofloxacin as a model active component. The powder forms liposomally encapsulated ciprofloxacin when wetted. Aerosol properties of this formulation were assessed using a new passive inhaler, in which the powder was entrained at a flow rate of 60l/min. A mass median aerodynamic diameter (MMAD) of 2.8 microm was achieved for this formulation. Using the experimental dispersion testing data, ciprofloxacin concentration in the airway surface liquid (ASL) was calculated using a Lagrangian deposition model. The reconstitution of the powder in various aqueous media gave drug encapsulation efficiencies as follows: 50% in water, 93.5% in isotonic saline, 80% in bovine mucin, 75% in porcine mucus and 73% in five-fold-diluted ex vivo human cystic fibrosis patient sputum.