We have produced a surrogate erythrocyte ('hemosomes') by encapsulating human hemoglobin in polymerized vesicles composed of diacetylenic phospholipids plus or minus cholesterol. Hemoglobin (in the presence or absence of allosteric effectors) was encapsulated by a freeze-thaw method in large, unilamellar vesicles composed of monomeric lipids. Entrapment was demonstrated by molecular-sieve chromatography. Brief irradiation with ultraviolet light produced polymeric hemosomes with polymerization kinetics and conversions similar to liposomes in the absence of protein. Photo-induced oxidation of the heme was eliminated or severely limited by a combination of prior ligation with CO and the maintenance of high intravesicular hemoglobin concentrations (5-10 mM internal hemoglobin). The inclusion of allosteric effectors within polymerized hemosomes facilitated near-quantitative conversion to the oxy-HbA form. Gas permeability of monomeric and polymeric hemosomes was demonstrated by spectroscopic methods. Reversible spectral shifts, corresponding to oxygenation-deoxygenation, were obtained after brief evacuation and exposure to oxygen or nitrogen. The gas permeability of polymerized hemosomes appears sufficient for the vesicles to act as oxygen carriers in vivo, a notion that is strengthened by their apparent hemocompatibility.