The objective of this study was to develop biodegradable polypeptide-lipid conjugates for the design of polymer-coated long-circulating liposomes (LCL). Lipid conjugates of poly(hydroxyalkyl L-asparagine/L-glutamine) were synthesized and incorporated into 0.15 microm dipalmitoyl phosphatidylcholine (DPPC)-cholesterol liposomes. Circulation times and biodistribution were assessed in rats using a radioactive lipid marker. Evaluation of the therapeutic activity of prednisolone phosphate loaded in 0.1 microm PHEA-DPPC-cholesterol liposomes in a rat experimental arthritis model was performed to demonstrate the drug-targeting potential of the polymer-coated liposomes. Coating of liposomes with poly(hydroxyethyl L-asparagine) (PHEA) and poly(hydroxyethyl L-glutamine) (PHEG) extended the circulation half-life to a similar extent as poly(ethylene glycol) (PEG), which is normally used for the preparation of LCL. Glutamine polymers with a hydroxypropyl or a hydroxybutyl group instead of hydroxyethyl group also yield prolonged circulation, however, not to the same extent as PHEA/G. The pharmacokinetic properties of PHEA-liposomes were independent of the lipid dose even at very low lipid doses of around 50 nmol per rat. PLP was successfully entrapped in PHEA-liposomes. These liposomes were shown to be stable in the circulation and equally effective in rat experimental arthritis as PLP encapsulated in PEG-liposomes. PHEA and PHEG are attractive alternative polymers for the design of LCL: their performance is similar to that of PEG-liposomes but they have the advantage of being biodegradable.