Liposomes coated with poly(hydroxyethyl L-glutamine) (PHEG) show prolonged circulation times and biodistribution patterns comparable to PEG-coated liposomes. While PEG is a nondegradable polymer, PHEG is expected to be hydrolyzed by proteases. In this study the enzymatic degradability of PHEG both in its free form and grafted onto liposomes was investigated, using the proteases papain, pronase E, and cathepsin B. Enzymatic action was monitored with a ninhydrin assay, which quantifies amine groups formed due to hydrolysis of amide bonds, and the degradation products were characterized by MALDI-ToF mass spectrometry. PHEG, both in its free form and when grafted onto liposomes, showed degradation into low molecular weight peptides by the enzymes. Thus, we present a polymer-coated long-circulating liposome with an enzymatically degradable coating polymer, avoiding the risk of cellular accumulation.