2',3'-Dideoxyinosine (ddI), an anti-human immunodeficiency virus (HIV) agent, was encapsulated in liposomes. The influence of the phospholipid/cholesterol ratio, concentration of phospholipid (PL), and chain length of PL on the encapsulation of ddI in multilamellar vesicles (MLVs), frozen and thawed multilamellar vesicles (FAT MLVs), and large unilamellar vesicles (LUVs) was studied. An optimum formulation was then selected to prepare long circulating liposomes. Stability studies at 4, 25, and 37°C and under certain stress conditions were performed. Release characteristics in phosphate buffer (pH 7.4) at 37°C were studied. Results show an increase in encapsulation efficiency (EE) with increasing amounts of cholesterol, a decrease in EE and increase in encapsulation yield (EY) with increasing concentrations of PL, and an increase in EE with increases in PL chain length, in both MLVs and LUVs. Freezing and thawing of MLVs had no influence on EE at a PL concentration of 10 mg/mL but increased EE at higher concentrations of PL. Various stability tests showed the formulation to be stable to leakage of entrapped drug when stored at 4, 25, and 37°C for 6 months, when subjected to mechanical stress, and on exposure to human serum. The release studies indicated that 70% of ddI was released over a period of 72 h.