The stability and spectral properties of nystatin-encapsulating liposomes, composed of various combinations of dipalmitoyl phosphatidylcholine (DPPC), cholesterol (CH) and distearoyl-N-(monomethoxy poly(ethylene glycol)succinyl) phosphatidylethanolamine (DSPE-PEG), were studied in order to elucidate the molecular state and localization of nystatin encapsulated in liposomes. Localization of nystatin at the surface region of the liposomal membrane was investigated by PEG/dextran two-phase partition and measurement of the fluorescence quenching of nystatin by p-xylene-bis-pyridinium bromide (DPX). In DPPC/DSPE-PEG liposomes and DPPC/CH/DSPE-PEG liposomes, containing 151 and 160 mcg nystatin per mg lipid, respectively, nystatin appeared to be present at the surface region of the liposomal membranes. Self-quenching of nystatin fluorescence was observed in DPPC/CH and DPPC/CH/DSPE-PEG liposomes even at low encapsulated amounts, suggesting the localization of nystatin in CH-incorporating membranes. In CH-free liposomes, nystatin molecules were at first delocalized in the membranes and then self-associated at a higher level of encapsulation. Absorption and circular dichroism (CD) spectra were also measured to examine the monomeric and aggregated states of nystatin in liposomes. High encapsulation efficacy was observed in DPPC and DPPC/DSPE-PEG liposomes, but the highest stability and retention of nystatin in liposomes were observed in DPPC/CH/DSPE-PEG liposomes, evaluated in terms of the nystatin and calcein release from nystatin-encapsulating liposomes in vitro. From the results, possible encapsulation mechanisms of nystatin in liposomes narrowed down to the following three points; interaction with lipid membrane, adsorption on the liposomal surface and complex formation with DSPE-PEG.