Abstract. Purpose: The in vivo pharmacokinetics (PK), biodistribution and antitumor activity of a new liposomal formulation of gemcitabine (GemLip) were compared to the conventional (clinical) formulation of gemcitabine (GemConv). Methods: Gemcitabine was entrapped in a vesicular phospholipid gel (VPG) consisting of densely packed liposomes. Redispersed VPG containing GemLip consisted of 33% liposomally entrapped and 67% free gemcitabine. The in vivo efficacies of GemLip and GemConv were compared using the subcutaneously growing human soft tissue sarcoma SXF 1301 and the orthotopically growing human bladder cancer BXF 1299T. PK and biodistribution were evaluated using radiolabeled drug and lipid in SXF 1301 tumor-bearing nude mice. Results: GemLip was highly active in SXF 1301at a gemcitabine dose of 69mg/kg (days1, 8 and 15; dose near the MTD). In the 6-mg/kg groups, complete tumor remissions were observed in seven of eight mice. Equimolar doses of GemConv resulted in only moderate tumor growth inhibition. Even at equitoxic doses (360mg/kg given on days1, 8 and 15, or 120mg/kg on days1, 5 and 8) GemConv was less active than GemLip. Furthermore, GemLip was active in the orthotopically growing BXF 1299T bladder cancer model at 6mg/kg and prevented distant organ metastasis. In the PK study, GemLip achieved a 35-fold higher plasma AUC (1680mgh/ml) than GemConv (47.6mgh/ml). The serum half-lives were 0.15h for free gemcitabine and 13.3h for liposomal gemcitabine (6mg/kg each i.v.). Moreover, gemcitabine levels in tumors were fourfold higher following injection of GemLip than following injection of GemConv. Conclusions: GemLip is a highly effective gemcitabine delivery system which results in superior gemcitabine pharmacodynamics and PK than GemConv. The enhanced in vivo efficacy might be explained by sustained release and passive tumor targeting.