Intercalation of amphotericin B into liposomes at a 10 mol% drug/lipid ratio decreased its cytotoxicity by 3- to 90-fold in cultured murine cells and reduced its lethality by 2- to 8-fold in a median lethal dose (LD50) test in mice when compared with the commercial deoxycholate-solubilized drug (LD50 = 2.3 mg/kg). The cytotoxicity and lethality of the liposomal preparations were a function of their lipid composition and diameter. There was no correlation between the reduction of toxicity in the tissue culture assay and the reduction of lethality in the LD50 test. The rank order of reduction of lethality was sterol-containing liposomes greater than solid liposomes greater than fluid liposomes. In general, small sterol-containing vesicles were less lethal than large vesicles of the same composition. Intercalation of amphotericin B in sterol or solid liposomes increased not only the LD50 but also the time to death. The organ distribution of amphotericin B 24 h after intravenous administration was similar whether the drug was given as the commercial deoxycholate preparation or in liposomes. Finally, there were no differences among any of the formulations in their fungicidal activity against Candida tropicalis and Saccharomyces cerevisiae in vitro. The lesser and slower lethality of the liposomal and detergent-solubilized drug suggests that the mechanism by which liposomes reduce the lethality of amphotericin B is by slowing its rate of transfer to a sensitive cellular target.