Purpose. To reduce the systemic toxicity and prolong the systemic presence of 1-(2-chloroethyl)-3-cyclohexyl-1-nitrosourea (CCNU), a lipid-based drug carrier was designed and characterized. Methods. The degree of CCNU association with lipid vesicles composed of 1,2-dimyristoyl-sn-glycero-3-phosphocholine (DMPC) and 1,2-dimyristoyl-sn-glycero-3-phosphoglycerol (DMPG) (1:1, m/m) was characterized and the drug decomposition rates of lipid-drug complexes were monitored. Effects of lipid association on drug potency against medulloblastoma cells and total systemic drug exposure in rats were determined. Results. At a CCNU:lipid molar ratio greater than 1:5, more than 90% of the drug was associated with the lipid vesicles. In aqueous suspensions, lipid association significantly reduced the first-order drug decomposition rate. In addition, lipid-associated CCNU exhibited a 4-fold increase in drug sensitivity with medulloblastoma cells. IC50 values for CCNU admired and encapsulated with lipid vesicles were 18 +/- 4.9 and 14.0 +/- 2.2 mu M, respectively, compared to 83 +/- 11.0 mu M for free CCNU. When administered to rats, lipid-associated CCNU increased the AUC (area under the concentration-time curve) of CCNU by approximately 2-fold (20.46 +/- 2.15 compared to 39.59 +/- 1.87 mu g.min/ml), and the terminal half-life (t(1/2 beta)) by almost 9-fold(17 +/- 9 compared to 147 +/- 48 min) over free CCNU. Despite the increase in total systemic drug exposure, rats treated with lipid-associated CCNU exhibited a significantly lower frequency of acute neurotoxicity. Conclusions. These data indicate that CCNU associated with lipid vesicles may increase drug stability, potency, and systemic exposure in rats.