Targeting drugs selectively to cancer cells can potentially benefit cancer patients by avoiding side effects generally associated with several cancer therapies. One of the attractive approaches to direct the drug cargo to specific sites is to incorporate ligands at the surface of the delivery systems. Integrin alpha(5)beta(1) is overexpressed in tumor vasculature and cancer cells, thus making it an attractive target for use in drug delivery. Our group has developed a fibronectin-mimetic peptide, PR_b, which has been shown to bind specifically to integrin alpha(5)beta(1), thereby providing a tool to target alpha(5)beta(1)-expressing cancer cells in vitro as well as in vivo. Our current work focuses on designing modified stealth liposomes (liposomes functionalized with polyethylene glycol, PEG) for combining the benefits associated with PEGylation, as well as imparting specific targeting properties to the liposomes. We have designed PEGylated liposomes that incorporate in their bilayer the fibronectin-mimetic peptide-amphiphile PR_b that can target several cancer cells that overexpress alpha(5)beta(1), including the MDA-MB-231 breast cancer cells used in this study. We have encapsulated doxorubicin inside the liposomes to enhance its therapeutic potential via PEGylation as well as active targeting to the cancer cells. Our results show that PR_b-functionalized stealth liposomes were able to specifically bind to MDA-MB-231 cells, and the binding could be controlled by varying the peptide concentration. The intracellular trafficking of the doxorubicin liposomes was examined, and within minutes after delivery the majority of them were found to be in the early endosomes, whereas after a longer period of time they had accumulated in the late endosomes and lysosomes. The functionalized liposomes were found to be equally cytotoxic as the free doxorubicin, especially at higher doxorubicin concentrations, and provided higher cytotoxicity than the nontargeted and GRGDSP-functionalized stealth liposomes. Thus, the PR_b-functionalized PEGylated nanoparticles examined in this study offer a promising strategy to deliver their therapeutic payload directly to the breast cancer cells, in an efficient and specific manner.