Background: Multidrug resistance (MDR) is a major obstacle in cancer treatment. Resistance of cultured tumor cells to major classes of cytotoxic drugs is frequently due to expression of a plasma membrane P-glycoprotein encoded by MDR genes. We have demonstrated that liposome-encapsulated doxorubicin is more toxic than the free drug and that it modulates MDR in Chinese hamster LZ cells and human colon cancer cells. Purpose: To investigate further the association between expression of P-glycoprotein and modulation of MDR by liposome-encapsulated doxorubicin, we studied vincristine-resistant HL-60/VCR leukemia cells, which express P-glycoprotein, and doxorubicin-resistant HL-60/ADR leukemia cells, which do not. Methods: Cells were exposed to various concentrations of free doxorubicin and liposome-encapsulated doxorubicin. The cellular content of doxorubicin was determined by fluorescence analysis, and cytotoxicity was determined by cell growth inhibition. Photoaffinity-labeling studies of P-glycoprotein binding were performed on HL-60/VCR and HL-60/ADR cells and KB-GSV2 cells transfected with the MDR1 gene (also known as PGY1). Results: The concentrations that caused 50% inhibition of growth (IC50) for free doxorubicin in HL-60, HL-60/ADR, and HL-60/VCR cells were 30 nM, 9 muM, and 0.9 muM, respectively. The values for liposome-encapsulated doxorubicin in parental HL-60 cells and HL-60/ADR cells were 20 nM and 9 muM, respectively, indicating little or no sensitization. In contrast, HL-60/VCR cells were fivefold more sensitive to liposome-encapsulated doxorubicin than to free doxorubicin, and IC50 was reduced to 0.17 muM. In HL-60 cells exposed to liposome-encapsulated doxorubicin, intracellular-doxorubicin accumulation was less than that seen with free drug. In contrast, in HL-60/VCR cells, accumulation was twofold to threefold higher than that with free doxorubicin. Liposome-encapsulated doxorubicin completely inhibited the photoaffinity labeling of P-glycoprotein by azidopine in membrane vesicles of HL-60/VCR cells, with a potency comparable to that of azidopine, suggesting that circumvention of MDR by liposomes is related to their specific interaction with P-glycoprotein. The studies with KB-GSV2 cells indicated that blank liposomes can directly inhibit photoaffinity labeling of P-glycoprotein. Conclusions: These results demonstrate the effectiveness of liposome-encapsulated doxorubicin in overcoming resistance in the multi-drug-resistant phenotype of HL-60/VCR cells by direct interaction with P-glycoprotein. Furthermore, they indicate that liposome-encapsulated doxorubicin may be an effective treatment for human cancers.