We report a method of preparing a submicron and stable liposome formulation of the non-cross-resistant anthracycline annamycin. The lipids were dimyristoylphosphatidyl choline (DMPC) and dimyristoylphosphatidyl glycerol (DMPG) at a 7:3 molar ratio and the optimal lipid:drug ratio was 50:1 (w/w). The selected formulation was a preliposome lyophilized powder that contained the phospholipids, annamycin, and Tween 20. The liposome suspension was obtained on the day of use by adding normal saline at 37 degrees C (1 ml/mg annamycin) and hand shaking for 1 min. The presence of Tween 20 was essential in shortening the reconstitution step (from > 2 h to 1 min), avoiding the early formation of free drug crystals, and reducing the median particle size by tenfold (from 1.5 microm to 0.15 microm) without destroying the liposome vesicles. At room temperature, the preliposome powder was chemically stable for > 3 months, and the liposome suspension was chemically and physically stable for > 24 h. The in vitro cytotoxicity of the formulation was equivalent to that of the same lipid composition prepared by the standard evaporation method. The results of the study indicate that small amounts of surfactant may be used to enhance the reconstitution step and reduce the size of liposome suspensions obtained from lyophilized preliposome powders. The formulation described is being used for ongoing clinical trials with liposomal annamycin.