Unlike conventional liposomes, sterically stabilized liposomes, with their smaller volume of distribution and reduced clearance, preferentially convey encapsulated drugs into tumor sites. Despite these improvements, intracellular delivery is hampered by the stable drug retention of the liposomes, which diminishes the efficacy of the liposomal drug. To facilitate uptake of liposomal drugs into cells, two cell-penetrating peptides, penetratin (PEN) and TAT, derived from the HIV-1 TAT protein, were studied. In contrast to control peptides, both TAT and PEN enhanced the translocation efficiency of liposomes in proportion to the number of peptides attached to the liposomal surface. A peptide number of as few as five could enhance the intracellular delivery of liposomes. The kinetics of uptake was peptide- and cell-type dependent. Intracellular accumulation of TAT-liposomes increased with incubation time, but PEN-liposomes peaked at 1 h and then declined gradually. After treatment with 1 microg/ml doxorubicin equivalents of liposome for 2 h, TAT increased the doxorubicin uptake of A431 cells by 12-fold. However, the improvement of uptake of liposomal doxorubicin was not reflected by cytotoxicity in vitro or tumor control in vivo. Our results demonstrated that merely adding CPP to a liposome encapsulating anticancer drug was inadequate in improving its antitumor activity. An additional approach to enhance the intracellular release of the encapsulated drug is obviously necessary.