This study reports a physicochemical stability evaluation of a previously reported liposomal prilocaine (PLC(LUV)) formulation (Cereda et al. J. Pharm. Pharmaceut. Sci. 7:235, 2004) before and after steam sterilization as well as its local toxicity evaluation. Prilocaine (PLC) was encapsulated into extruded unilamellar liposomes (LUVs) composed by egg phosphatidylcholine:cholesterol:alfa-tocopherol (4:3:0.07, mole %). Laser light-scattering analysis (p > 0.05) and thiobarbituric acid reaction (p > 0.05) were used to evaluate the liposomes physical (size) and chemical (oxidation) stability, respectively. The prilocaine chemical stability was followed by (1)H-nuclear magnetic resonance. These tests detected no differences on the physicochemical stability of PLC or PLC(LUV), sterilized or not, up to 30 days after preparation (p > 0.05). Finally, the paw edema test and histological analysis of rat oral mucosa were used to assess the possible inflammatory effects of PLC(LUV). PLC(LUV) did not evoke rat paw edema (p > 0.05), and no significant differences were found in histological analysis, when compared to the control groups (p > 0.05). The present work shows that PLC(LUV) is stable for a 30-day period and did not induce significant inflammatory effects both in the paw edema test and in histological analysis, giving supporting evidence for its safety and possible clinical use in dentistry.