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Mitomycin C (MMC) is a powerful anti-bacterial, anti-fungal and anti-tumor antibiotic, often active against multidrug resistant cells. Despite a broad spectrum of antitumor activity, MMC clinical use is relatively limited due to its fast clearance and dose-limiting toxicity. To exploit the potential antitumor activity of MMC and reduce its toxicity we have previously developed a formulation of pegylated liposomes with a lipophilic prodrug of MMC (PL-MLP), activated by endogenous reducing agents which are abundant in the tumor cell environment in the form of different thiols. PL-MLP has minimal in vitro cytotoxicity unless reducing agents are added to the cell culture to activate the prodrug. In the present study, we hypothesized that targeting PL-MLP via folate receptors will facilitate intracellular activation of prodrug and enhance cytotoxic activity without added reducing agents. We grafted a lipophilic folate conjugate (folate-PEG(5000)-DSPE) to formulate folate targeted liposomes (FT-PL-MLP) and examined in vitro cell uptake and cytotoxic activity in cancer cell lines with high folate receptors (HiFR). 3H-cholesterol-hexadecyl ether (3H-Chol)-radiolabeled liposomes were prepared to study liposome-cell binding in parallel to cellular uptake of prodrug MLP. 3H-Chol and MLP cell uptake levels were 4-fold and 9-fold greater in KB HiFR cells when FT-PL-MLP is compared to non-targeted PL-MLP liposomes. The cytotoxic activity of FT-PL-MLP liposomes was significantly increased up to ˜ 5-fold compared with PL-MLP liposomes in all tested HiFR expressing cell lines. The enhanced uptake and intracytoplasmic liposome delivery was confirmed by confocal fluorescence studies with Rhodamine-labeled liposomes. In vivo, no significant differences in pharmacokinetics and biodistribution were observed when PL-MLP was compared to FT-PL-MLP by the intravenous route. However, when liposomes were directly injected into the peritoneal cavity of mice with malignant ascites of J6456 HiFR lymphoma cells, the tumor cell levels of MLP were significantly greater with the folate-targeted liposomes. Thus, folate targeting enhances liposome uptake by tumor cells enabling intracellular activation of prodrug in the absence of exogenous reducing agents, and leading to increased cytotoxicity. These results may be particularly relevant to the application of folate-targeted PL-MLP in intracavitary or intravesical treatment of cancer.