Diamidine (imidocarb, 3,3＇-di-imidasolin-2-yl carbonylide dihydrochloride), a babesicidal drug, was encapsulated in liposomes to reduce the toxicity of the drug and to increase its therapeutic index. Liposomes were prepared from the mixture of egg yolk phosphatidyl choline and cholesterol (1:1 molar ratio) by a reverse-phase evaporation technique. Liposomes used in the study were of diameter 1.5-2.5 mum and contained 53 mg/ml (0.125 M) of diamidine. Animal tests were performed in three animal species. The LD50 values of the liposome-encapsulated diamidine administered intravenously and intramuscularly in inbred white mice were 52 and 6000mg/kg, respectively. The overall decrease in acute toxicity compared to that for free drug amounted to 50-fold. At a dose of 30-80 mg/kg the loposomal diamidine was satisfactorily tolerated by sheep and horses, while free diamidine is lethal to these animals at 10mg/kg. The liposome-encapsulated diamidine had no effect on metabolic functions of the liver. After four i.m. injections of the liposomal diamidine at a dose of 30 mg/kg we observed a 10% increase in haemoglobin content and an elevation in erythrocyte count in the blood of Babesia equi-infected horses. This indicates a therapeutic effect of the liposomal form of the drug.