The role of celastrol in the treatment of cancer has been an area of growing interest. To circumvent the issues of low solubility, poor bioavailability, and systemic toxicity of celastrol, we prepared liposomal celastrol using the thin-film dispersion method. We characterized particle size, encapsulation efficiency, and pharmacological parameters of liposomal celastrol. The drug concentration in plasma and tissues was measured using LC-MS/MS. In addition, the sulforhodamine B assay was used to determine the 50% inhibiting concentration. We assessed the effects of the compound in SHG-44 glioma subcutaneous xenografts in BALB/c nude mice. To compare the toxic effects of liposomal and free celastrol, the weight as well as hematologic, heart, liver, and kidney parameters were measured weekly and the morphology of organ tissues was observed pathologically. We found that liposomal celastrol had high encapsulation efficiency (71.67%) and liposomal celastrol had a higher C(max) and area under the curve, longer t(1/2), and better biodistribution than free celastrol. A cytotoxicity assay indicated that free celastrol had lower 50% inhibiting concentration values than the liposomal celastrol; however, treatment of subcutaneous xenografts with 1 mg/kg of liposomal celastrol induced greater antitumor activity than free celastrol at an equimolar concentration. In addition, a 4 mg/kg dose of liposomal celastrol had fewer severe side effects than free celastrol at the same dose. In this study, we found that the use of liposomes as a carrier of celastrol increased the bioavailability and reduced the side effects of the compound. Our findings suggest that liposomal celastrol should be further investigated in the clinical setting.