Anthracyclines are widely used in paediatric oncology, but their use is limited by the risk of cumulative cardiac toxicity. Encapsulating anthracyclines in liposomes may reduce cardiac toxicity and possibly increase drug availability to tumours. A phase I study in paediatric patients was designed to establish the dose limiting toxicity (DLT) and maximum tolerated dose (MTD) after a single course of liposomal daunorubicin, 'DaunoXome', as a 1 h infusion on day 1 of a 21 day cycle. Patients were stratified into two groups according to prior treatment: Group A (conventional) and group B (heavily pretreated patients). Dose limiting toxicity was expected to be haematological, and a two-step escalation was planned, with and without G-CSF support. Pharmacokinetic studies were carried out in parallel. In all, 48 patients aged from 1 to 18 years were treated. Dose limiting toxicity was neutropenia for both groups. Maximum tolerated dose was defined as 155 mg m(-2) for Group A and 100 mg m(-2) for Group B. The second phase with G-CSF was interrupted because of evidence of cumulative cardiac toxicity. Cardiac toxicity was reported in a total of 15 patients in this study. DaunoXome shares the early cardiotoxicity of conventional anthracyclines in paediatric oncology. This study has successfully defined a haematological MTD for DaunoXome, but the significance of this is limited given the concerns of delayed cardiac toxicity. The importance of longer-term follow-up in patients enrolled into phase I studies has been underestimated previously, and may lead to an under-recognition of important adverse events.