Potential toxicity due to nonspecific distribution is one of the major challenges with currently available chemotherapeutics. In the present report we have developed Docetaxel (DTX) loaded Anacardic acid (AA) functionalized liposomes (DTX-AA-PEG-Liposomes) to have the advantage of selective distribution to cancer cells due to recognition and enhanced uptake by VEGF receptors. AA dual conjugate (AA-PEG-AA) was synthesized by using carbodiimide chemistry and further used to formulate the AA functionalized DTX loaded liposomes by using film hydration method. Extensive optimization of different process variables resulted in the formation of liposomes with particle size 126.4 ± 6.2 nm and PDI 0.239 ± 0.03. The freeze dried DTX-AA-PEG-Liposomes demonstrated sustained release for up to 24 h and excellent stability at accelerated storage stability conditions. Qualitative cell uptake studies demonstrated remarkably higher cellular uptake of Coumarin-6 (C-6) loaded liposomes, while quantitative determination revealed 2.64 and 2.88-fold higher uptake of DTX-AA-PEG-Liposomes in comparison with free DTX. Cell culture studies in MCF-7 to determine cellular uptake mechanism demonstrated clathrin and caveolae mediated internalization of liposomes, independent of Organic Anion Transporting Polypeptides (OATPs) transporters. Moreover, developed liposomes demonstrated relatively higher cell inhibition and apoptosis in MCF-7 cells as compared to free DTX. Furthermore, in vivo pharmacokinetics demonstrated 3.7 and 4.5-fold increase in AUC and t1/2 value of DTX-AA-PEG-Liposomes as compared to Taxotere®, respectively. Moreover, DTX-AA-PEG-Liposomes demonstrated significant reduction in tumor volume and toxicity in comparison with marketed formulation (Taxotere®), confirming enhanced efficacy and safety of the developed formulation.