The application of liposomes for improved drug delivery to the lung is promising. Liposome-mediated pulmonary drug delivery promotes an increase in drug retention-time in the lung and more importantly, a reduction in extrapulmonary side-effects, invariably resulting in enhanced therapeutic efficacies. The engineering of an effective liposomal drug formulation for inhalation therapy must take into consideration the leakage problem associated with the nebulization process; vesicle stability and release kinetics within the pulmonary milieu; and, the altered pharmacokinetics of the entrapped drug. The delivery of liposome-entrapped antioxidants via the tracheobronchial route has been found to be very useful in increasing the half-times of the administered agents, thus providing a sustained release effect for prolonged drug action. The entrapment in liposomes of alpha-tocopherol, an extremely insoluble but highly effective antioxidant, has been shown to be very effective in ameliorating oxidant-induced injuries in the lung. The use of bifunctional liposomes containing two antioxidants have been determined to provide excellent resistance to an oxidative challenge and appears to hold promise for improved clinical applications in antioxidant therapy.