Using nanocapsules to deliver diagnostic and therapeutic agents to targeted biological sites enhances the safety and effectiveness of healthcare by decreasing toxicity and increasing the accumulation of medicinal agents at targeted sites. Liposomes, nanocapsules made of naturally occurring lipids, boast many advantages for the delivery of therapeutic agents. This article reviews both the advantages and challenges associated with liposomal drug delivery for the treatment of cancerous tumors and infectious diseases. These minute spherical sacs of phospholipid molecules are flexible carriers that can be modified in various ways to optimize their use. Examples of this include alteration of the size of liposomes to selectively accumulate in tumor microenvironments and “PEGylation” of their surface to reduce uptake of liposomes by the mononuclear phagocytic system (MPS). While one of the main challenges of liposomal drug delivery is the heightened uptake of liposomes by the MPS, this unique property can be used to target diseased areas with a significant MPS presence. Furthermore, the liposomal structure can be manipulated to allow for the triggered release of internal contents with externally controlled factors. Liposomes carrying therapeutic radionuclides can be injected directly into solid tumors and dispersed throughout the tumor by convection-enhanced delivery. The flexibility and pliability of liposomes allow them to move through tight spaces within a tumor with much greater dispersion and penetration when compared to more rigid nanoparticles. Due to the benefits of radionuclide-carrying liposomes in disease diagnosis and delivery of chemotherapeutic agents, their utilization is expected to be expanded.