Effect of lipid composition on encapsulation and stability of dexamethasone (DXM) incorporating multilamellar vesicles (MLV) is studied. MLVs composed of phosphatidylcholine (PC) or distearoyl-glycero-PC (DSPC), with or without cholesterol (Chol), are prepared and the release of DXM during vesicle incubation in buffer or plasma proteins is evaluated. Incorporation of DXM is slightly higher in DSPC liposomes compared with PC, whereas the drug is displaced from liposomes, as the Chol content of liposome membranes increases. Plain lipid and Chol-containing liposomes lose similar fractions of vesicle-incorporated DXM during incubation in buffer or serum, whereas DXM release kinetics are similar (for each liposome type studied), implying that drug release is due mainly to dilution of liposome dispersions that leads to repartitioning of DXM.