Gemcitabine (GEM) is found effective in the treatment of many solid tumors. However, its use is restricted due to its small circulation half-life, fast metabolism and low capacity for selective tumor uptake. Folate receptors (FRs) have been recognized as cellular surface markers, which can be used for cancer targeting. PEGylated liposomes decorated with folic acid have been investigated for several anticancer agents not only to extend plasma half-life but also for tumor targeting via folic acid receptors which overexpressed on tumor cell surface. Therefore, the objective of the present study was to prepare GEM-loaded folic acid tagged liposomes to improve the pharmacokinetics and tumor distribution of GEM. The blank folate-targeted liposomes composed of HSPC/DSPE-mPEG2000/DSPE-mPEG-Folic acid were prepared first by thin film hydration technique. GEM was then loaded into liposomes by remote loading technique. The optimized liposomal formulations were evaluated in vitro for GEM release using dialysis technique, HeLa cell uptake using FACS technique, and cytotoxicity using MTT dye reduction assay. The comparative in vivo pharmacokinetic and biodistribution characteristics of radiolabeled (99mTc-labeled) plain GEM solution, and all liposomal formulations (conventional:CLs; stealth: SLs; folate targeted: FTLs) were evaluated in mice model. GEM-loaded FTLs showed sustained release profile, efficient uptake by HeLa cells and greater cytotoxicity. Further, FTLs displayed significantly improved pharmacokinetics, and biodistribution profile of loaded GEM. In conclusion, the developed GEM-loaded folic acid receptor-targeted liposomal formulation could be a promising and potential alternative formulation for further development.