Herein, we demonstrate for the first time the use of hydrogel-in-liposome nanoparticles (lipogels) as a promising drug delivery vehicle for the active encapsulation of the anticancer drug 17-DMAPG, a geldanamycin (GA) derivative. This model drug was chosen due to its improved aqueous solubility (4.6 mg/ml) compared to the parent GA (<0.01 mg/ml), and presence of a tertiary amine which readily protonates at low pH. For the design of lipogels, a PAA hydrogel core was formed inside liposomes through UV-initiated DEAP activation and polymerization of AA and BA. We have demonstrated here that electrostatic interactions between drug and gel are critical for active encapsulation and sustained release of 17-DMAPG. We found that optimal loading conditions could be obtained (88% loading efficiency) through control of pH, temperature and incubation time. Dramatic sustained drug release from lipogels was achieved independent of the external solution pH (ca. 54 h to 50% drug release) and confirmed that the lipid bilayer was intact in the presence of the gel core. In vitro cell culture studies revealed that at the highest concentration tested, which corresponded to approximately 0.4 mg/ml of material, lipogels did not exert cytotoxicity to cells. (C) 2013 Elsevier Inc. All rights reserved.