An iron chelator of low water solubility, HBED, has been encapsulated in the lipid bilayers of unilamellar and multilamellar liposomes. The effectiveness of liposome-encapsulated HBED for removing excess iron burden from the RE system of the mouse liver (i.e., Kupffer cells) has been compared to that of the most commonly used iron chelator, DF, a water-soluble drug. We report the following: (1) At a single dose of 25 mg/kg, HBED in liposomes is more effective in removing excess iron than free nonencapsulated HBED. (2) HBED is a more potent iron chelator than DF; after a single dose of 25 mg/kg, about 25% of the originally injected iron is excreted within 7 days from mice given HBED either in small unilamellar or in large multilamellar liposomes, whereas about 18% is excreted from mice given the same dose of liposome-encapsulated DF. (3) Although the iron burden is introduced into the Kupffer cells, liposome-encapsulated HBED promotes iron excretion mainly via the bile and feces, whereas liposome-encapsulated DF promotes iron excretion through the kidney. (4) Cell fractionation studies show that encapsulation of HBED in the lipid bilayers of liposomes does not alter the uptake pattern of liposomes by the Kupffer and parenchymal cells of the liver; in other words, Kupffer cells are more effective in taking up large-sized multilamellar liposomes while parenchymal cells take up small-sized unilamellar liposomes more effectively. (5) Electron microscopic studies demonstrate that the liver biliary canaliculi are enlarged and filled with vesicular materials in mice given liposome-encapsulated HBED and that this condition does not occur in control mice or mice given liposome-encapsulated DF. Our results have thus demonstrated that liposomes could be very useful as injection vehicles for metal chelators that are not readily soluble in water. HBED is also demonstrated to be far superior to DF, the iron chelator of choice for therapy of transfusional iron overload.