Using liposomes, multilamellar lipid vesicles (MLV), we have found that liposome-incorporated cyclosporine is not only less toxic but also more effective in prolonging survival of cardiac allografts in mice. Following intravenous injection of liposome-incorporated drug, cyclosporine levels in blood were shown to decrease rapidly, while concentrations in spleen were higher (when compared with concentration following administration of commercial preparation). In this context, possible mechanisms of the beneficial effect of liposome-incorporated cyclosporine are discussed.