Chemotherapy has been proposed for patients with hepatocellular carcinoma (HCC) associated with well-compensated cirrhosis who are unsuitable for locoregional treatments. Anthracyclines are the most active agents against HCC, although their toxicity is often unpredictable; thus, there is a need for new active drugs with a safe toxicity profile. The liposomal formulation of the anthracycline daunorubicin has low systemic toxicity and is taken up strongly by the liver. We started a phase I study with liposomal daunorubicin (starting dose 80 mg/m2 every 21 days) in patients with hepatocellular carcinoma and Child-Pugh stage A or B liver cirrhosis. At the starting dose, we recorded dose-limiting toxicities (1 hyperbilirubinemia, 1 prolonged prothrombin time, 1 persisting grade 3 neutropenia) in 3 out of 4 patients. Thus, according to protocol, we went down to the dose level of 60 mg/m2 but still 2 out of 3 patients had unacceptable toxicity (1 hypertransaminasemia, 1 hyperbilirubinemia with encephalopathia). Finally, we treated 4 more patients at the dose level of 40 mg/m2 and again we recorded liver toxicity in three of them. Overall haematological toxicity was mild and significant non-haematologic toxicities, other than hepatic, were not recorded. The toxicity profile observed warns against further assessment of liposomal daunorubicin in patients with hepatocellular carcinoma and liver cirrhosis.