A potential approach to avoid the complications of systemic immunosuppression is to deliver immunosuppressive agents locally to the site of the allograft. Liposomes are phospholipid particles that allow delivery of drugs preferentially to the reticuloendothelial system. Since the liver is a primary component of the RES, we hypothesized that liposome technology could be utilized to deliver immunosuppressive agents locally to a transplanted liver, thereby avoiding the complications of systemically delivered immunosuppression. We evaluated this hypothesis with a prototypic cyclosporine liposome in a rat model. Pharmacokinetic studies of this liposome indicated earlier clearance from the systemic circulation and increased hepatic uptake relative to the standard intravenous form of CsA. Decreased nephrotoxicity was also shown in an ischemic kidney model in the rat. The immunosuppressive efficacy of this liposome was also tested in a rat liver transplant model. There was a significant increase in survival compared with standard intravenous CsA when both drugs were administered at a dose of 1.75 mg/kg/day for seven days posttransplant (P < .05, CsA liposome-treated versus CsA/saline-treated). There were no demonstrable early toxic effects or late toxic effects observed with follow-up to 100 days. These data indicate that CsA liposomes have potential for use as an immunosuppressive agent with increased efficacy and decreased nephrotoxicity relative to the commercially available form of intravenous CsA. This improved therapeutic index of a locally targeted drug may lead to fewer complications attributed to systemic immunosuppression.