To manipulate the activity of polymyxin B sulfate (PXB sulfate) by encapsulation in liposomes derived from appropriately selected surfactants that exhibit optimum entrapment and aerosol delivery of encapsulated PXB sulfate. A combination of phospholipid (DMPG) and nonionic surfactants (Span 20 + Tween 80) was selected to encapsulate PXB sulfate. The nebulization properties were evaluated by nebulizing the liposomal dispersions with Pari LC Star nebulizers. The in vitro antibacterial activities of the original and nebulized liposomal formulations were evaluated against Pseudomonas aeruginosa (ATCC 27853) strains by broth microdilution. and their minimum inhibitory concentrations (MICs) were compared with those of free PXB sulfate and colistin methanesulfonate. Measurements of the aerosol properties during nebulization were used as input for a mathematical model of airway surface liquid in the lung of an average adult, to estimate the airway surface liquid concentration of the deposited liposomal PXB sulfate. The selected combination of surfactants showed maximum nebulization efficiency without compromising liposomal integrity during nebulization. PXB sulfate was added at a concentration of 10 mg/ml, and a molar ratio of PXB sulfate to dimyristoyl phosphatidylglycerol (DMPG) (sodium salt) of 1:5 was required to achieve 100% entrapment of PXB sulfate and no leakage on nebulization. Another formulation comprising half the concentrations of the optimized non-ionic surfactants and DMPG was prepared to achieve a balance between the toxicity and efficacy after nebulization of encapsulated PXB sulfate. The in vitro antibacterial activities against Pseudomonas aeruginosa indicated that the activity of PXB sulfate could be manipulated by appropriate concentrations of the selected surfactants to achieve activity equivalent to that of colistin methanesulfonate, which is known to be less toxic than unencapsulated PXB sulfate. The estimated airway surface liquid concentrations of the deposited liposomal PXB sulfate reveal that the MIC of the nebulized liposomal PXB sulfate can be achieved over most of the tracheobronchial region, using a jet nebulizer with a volume fill of 2.5 ml or more. It was established from this study that the encapsulation of PXB sulfate in liposomes reduces its activity against P. aeruginosa strains. Concentrations of PXB sulfate deposited in the tracheobroncial region, predicted using a mathematical model, were above the measured MICs except in the case of very high mucus production rate and low mucus velocities.