Erlotinib-HCl is a quinazoline derivative used as a drug in the therapy of non-small-cell lung cancer. The present study was conducted to compare the subacute toxicity induced by Erlotinib-HCl delivered to rats as nanoparticles and as free drug. Wistar rats were orally administered with a daily dosage of 200 mg kg(-1) Erlotinib-HCl either as free drug or as Poly(D,L-lactic-co-glycolic acid) (PLGA) encapsulated nanoparticles. After four weeks of treatment, the animals were analyzed for toxicological changes. Although nanoparticulate form of the drug did not induce any toxicity, free drug significantly reduced the levels of white blood cells (WBC), red blood cells (RBC) and haemoglobin, while increasing the levels of neutrophils and corpuscular haemoglobin. Moreover, aspartate aminotransferase (AST) and alanine aminotransferase (ALT) levels were significantly increased in the animals administered with free drug. Histopathological studies confirmed significant damage to the internal organs of animals treated with free drug. Whereas, the internal organs of animals treated with the drug encapsulated in PLGA nanoparticles were more or less similar to the healthy organs. Our results show that Erlotinib-HCl delivered in the form of nanoparticles has less toxic effect than the free drug in experimental rats.