Liposome aggregation is a major problem associated with the covalent attachment of proteins to liposomes. This report describes a procedure for coupling proteins to liposomes that results in little or no change in liposome size. This is achieved by incorporating appropriate levels of poly(ethylene glycol)-modified lipids into the liposomes. The studies employed thiolated avidin-D coupled to liposomes containing the thio-reactive lipid N-(4-(p-maleimidophenyl)butyryl)dipalmitoyl phosphatidylethanolamine (1 mol % of total lipid) and various amounts of MePEG-S-POPE (monomethoxypoly(ethylene glycol) linked to phosphatidylethanolamine via a succinate linkage). The influence of PEG chain length and density was also assessed. The presence of PEG on the surface of liposomes is shown to provide an effective method of inhibiting aggregation and the corresponding increase in liposome size during the covalent coupling of avidin-D. A balance between the size of the PEG used and the amount of PEG-lipid incorporated into the liposome had to be achieved in order to maintain efficient coupling. Optimal coupling efficiencies in combination with minimal aggregation effects were achieved using 2 mol % MePEG2000-S-POPE (PEG of 2000 MW) or 0.8 mol % MePEG5000-S-POPE (PEG of 5000 MW). At these levels, the presence of PEG did not affect the biotin binding activity of the covalently attached avidin. The ability of the resulting liposomes to specifically target to biotinylated cells is demonstrated.