A phase IIb trial using liposome-encapsulated muramyl tripeptide phosphatidylethanolamine (L-MTP-PE) in combination with ifosfamide (IFX) for patients with relapsed osteosarcoma was undertaken to determine (a) the tolerability of the combination therapy, (b) if L-MTP-PE increased the toxicity of IFX, and (c) whether IFX altered or suppressed the in vivo immune response to L-MTP-PE. Patients had histologically proven osteosarcoma and pulmonary metastases that either developed during adjuvant chemotherapy or were present at diagnosis, persisted despite chemotherapy, and recurred following surgical excision. Stratum A patients were rendered clinically free of disease within 4 weeks of study entry prior to receiving combination therapy. IFX was administered at 1.8 g/m2 for 5 days every 21 days for up to eight cycles. L-MTP-PE was administered twice weekly for 12 weeks, then once weekly for 12 weeks. Once cycle of combination therapy was defined as 5 days of IFX and 3 weeks of L-MTP-PE therapy. Stratum B patients had measurable disease at study entry that was judged to be amenable to surgical resection. Stratum B patients received three cycles of combination therapy prior to surgery to judge clinical and histologic response. Postoperatively, patients received an additional five cycles. A total of nine patients were entered into the protocol: six on stratum A and three on stratum B. Serial blood samples were collected and assayed for cytokine levels (tumor necrosis factor-alpha [TNF alpha], interleukin-6 [IL-6], IL-8, neopterin, C-reactive protein). In addition, peripheral blood monocyte tumoricidal activity was evaluated pre- and post-combination therapy. Complete blood counts with differential and platelet counts were followed weekly. No increase in the toxic side effects of IFX was demonstrated when administered with L-MTP-PE nor were delays in IFX administration due to neutropenia experienced. The toxic side effects of L-MTP-PE were also not increased. Elevations of serum C-reactive protein, plasma neopterin, IL-6, IL-8, and TNF alpha following combination therapy were similar to those observed in patients treated with L-MTP-PE alone. Monocyte-mediated tumoricidal activity was elevated 24 and 72 h following L-MTP-PE and IFX therapy, similar to what has been reported following L-MTP-PE alone. Tumor specimens obtained from stratum B patients showed the histologic characteristics consistent with a "chemotherapy effect," i.e., dead, amorphous, acellular osteoid with cell drop-out.(ABSTRACT TRUNCATED AT 400 WORDS)