In a preceding paper (Ouyang et al., 1995, this issue), we have characterized cyclosporine incorporation into well-defined liposomal systems, large unilamellar vesicles. This study demonstrated that only modest drug levels could be accomodated within the membrane, particularly for cholesterol-containing Liposomes, and that rapid drug exchange could occur between vesicles. This raised the possibility that following intravenous administration, drug migration to other blood components might negate the potential benefits arising from liposomal delivery. We have, therefore, examined the pharmacokinetics and biodistribution of both cyclosporine and its Liposomal carrier. We show that whereas Liposomes, as expected, are only slowly cleared from the blood, redistribution of cyclosporine occurs much more rapidly. Further we have shown that Liposomal loss of cyclosporine in blood results fi om drug migration to the lipoproteins and, to a lesser extent, the erythrocytes. As a result, while Liposomes accumulate preferentially in organs of the reticuloendothelial system after intravenous administration, tissue cyclosporine levels, in general, do not reflect the distribution profile obtained for the liposomal carrier.