Paclitaxel, a recently approved antineoplastic agent, is cleared slowly from the peritoneal cavity after i.p. injection, and therefore appears to be promising for intracavitary therapy of malignancies confined to the peritoneal cavity. However the dose-limiting toxicity of Taxol, the clinical formulation of paclitaxel, was severe abdominal pain, likely caused by the excipients (Cremophor EL and ethanol) that are required to overcome low drug solubility. We tested the hypothesis that a liposome-based formulation could modulate paclitaxel toxicity independent of antitumor activity. The dose-dependence of toxicity and antitumor effect of paclitaxel liposomes was evaluated after i.p. administration against i.p. P388 leukemia. Liposomal paclitaxel showed antitumor activity similar to that of free paclitaxel (as Taxol), but was better tolerated by both healthy and tumor-bearing mice.