5-Iodo-2'-deoxyuridine (IUdR) is an effective radiosensitiser but its clinical development has been limited by toxicity. Prolonged intravenous infusions of IUdR are necessary for optimal tumour uptake but cause dose-limiting myelosuppression. The lack of selective tumour uptake can lead to radiosensitisation of adjacent normal tissues and enhanced local radiation toxicity. Liposomal IUdR delivery offers selective targeting of tumour tissues and avoidance of local and systemic toxicity. In these studies, we report the development of a pegylated liposome containing a lipophilic IUdR derivative (3', 5'-O-dipalmitoyl-5-iodo-2'-deoxyuridine) for use in a head and neck cancer xenograft model. Initial studies confirmed the ability of IUdR to sensitise two head and neck cancer cell lines to single fractions of radiotherapy (SFRT) and this effect was seen to correlate with the thymidine replacement index in KB cells. In vivo delivery of single doses of either unencapsulated IUdR or pegylated liposomal IUdR (PLIUdR) to nude mice bearing KB xenograft tumours did not enhance the effect of SFRT delivered 16 h later. When PLIUdR was delivered by a protracted administration schedule to a dose of 48 mg kg(-1) over 7 days, it enhanced the effect of both 4.5 Gy SFRT and fractionated radiotherapy. PLIUdR was at least as effective as unencapsulated IUdR delivered by multiple intravenous injections or continuous subcutaneous infusion. Immunohistochemistry with a specific anti-IUdR monoclonal antibody confirmed greater levels of tumour staining in tumours from animals treated with PLIUdR compared with those treated with unencapsulated IUdR.