Clinical translation of sustained release formulations for local anesthetics has been limited by adverse tissue reaction. Exparel™ (DepoFoam bupivacaine) is a new liposomal local anesthetic formulation whose biocompatibility near nerve tissue is not well characterized. Exparel™ injection caused sciatic nerve blockade in rats lasting 240 min compared to 120 min for 0.5% (w/v) bupivacaine HCl and 210 min for 1.31% (w/v) bupivacaine HCl (same bupivacaine content as Exparel™). On histologic sections four days after injection, median inflammation scores in the Exparel™ group (2.5 of 4) were slightly higher than in groups treated with bupivacaine solutions (score 2). Myotoxicity scores in the Exparel™ group (2.5 of 6) were similar to in the 0.5% (w/v) bupivacaine HCl group (3), but significantly less than in the 1.31% (w/v) bupivacaine HCl group (5). After two weeks, inflammation from Exparel™ (score 2 of 6) was greater than from 0.5% (w/v) bupivacaine HCl (1) and similar to that from 1.31% (w/v) bupivacaine HCl (1). Myotoxicity in all three groups was not statistically significantly different. No neurotoxicity was detected in any group. Tissue reaction to Exparel™ was similar to that of 0.5% (w/v) bupivacaine HCl. Surveillance for local tissue injury will be important during future clinical evaluation.