We have investigated the effects of an improved liposomal formulation (extruded DOTAP:cholesterol (DOTAP:Chol)-DNA complex) on transgene expression in tumor cells and normal cells of murine and human origin both in vitro and in vivo. In vitro, transgene expression was significantly increased (P = 0.01) in human tumor cells compared to normal human cells. The increased transgene expression was due to increased uptake of the liposome-DNA complex by tumor cell phagocytosis. Furthermore, immunohistochemical analysis demonstrated a greater transgene expression in lung tumors than in surrounding normal tissues. Increased transgene expression due to enhanced uptake of the liposome-DNA complexes by tumor cells in vivo was also demonstrated using fluorescently labeled DOTAP:Chol liposomes. Finally, evaluation of lung tissue explants obtained from patients undergoing pulmonary resection demonstrated significantly higher (P = 0.001) transgene expression in tumor cells than in normal cells. Thus, we demonstrated that intravenous injection of DOTAP:Chol-DNA complex results in increased transgene expression in tumor and is due to increased phagocytosis of the complexes by tumor cells.