We have completed a phase I and pharmacology study of liposomally-encapsulated daunorubicin (DaunoXome). Of 32 patients entered, 30 were evaluable. No toxicity was encountered at the initial dose-escalation steps from 10 to 60 mg/m2. At 80 mg/m2, two patients manifested grade 2 neutropenia. At least grade 3 neutropenia occurred in all patients receiving 120 mg/m2. Alopecia and subjective intolerance were mild. Cardiotoxicity was not observed except for an episode of arrhythmia in a patient with lung cancer and prior radiation. Only one minor objective response was observed in this population of refractory solid tumors. Pharmacokinetics differed from those of the free drug with no detection of daunorubicinol. We recommend future phase II studies with a dose of 100 mg/m2 in previously treated and 120 mg/m2 of DaunoXome in previously untreated patients with solid tumors.