To determine the role of the hepatic sinusoidal endothelium in the hepatic disposition of liposomal doxorubicin, we compared the hepatic pharmacokinetics of doxorubicin hydrochloride and the pegylated, liposomal formulation of doxorubicin (Caelyx). The multiple indicator-dilution technique and electron microscopy were used to study the disposition of doxorubicin and liposomal doxorubicin in the rat liver. Doxorubicin had a volume of distribution 1.56 +/- 0.45 times greater than that of the extracellular marker, sucrose, whereas liposomal doxorubicin had a volume of distribution 0.56 +/- 0.30 times smaller than that of sucrose (P < 0.001). The recovery of doxorubicin was less than that of liposomal doxorubicin (70 +/- 24% versus 94 +/- 17%, P < 0.05). The disposition of liposomal doxorubicin was found to be flow-limited, whereas a permeability-limited sequestration model fitted doxorubicin. The transfer of doxorubicin across the hepatocyte membrane was symmetrical (permeability - surface area product for influx 0.02 +/- 0.01 ml s/g versus 0.03 +/- 0.02 ml s/g for efflux) and consistent with diffusion. Electron microscopy confirmed that liposomes were restricted entirely to the sinusoidal lumen and none were seen in the extracellular space of Disse. Liposomal doxorubicin is restricted to the sinusoidal lumen, presumably secondary to steric exclusion by fenestrations in the sinusoidal endothelium. This provides the mechanism for the longer half-life and reduced hepatic extraction of liposomal doxorubicin compared with doxorubicin. The sinusoidal endothelium and fenestrations within the sinusoidal endothelium have an important role in hepatic pharmacology and are important considerations when designing liposomal preparations.