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The goal of this study was to compare the effects of liposomal and free glucocorticoid formulations on joint inflammation and activity of the hypothalamic-pituitary-adrenal (HPA) axis during experimental antigen-induced arthritis (AIA). A dose of 10 mg/kg liposomal prednisolone phosphate (PLP) gave a suppression of the HPA-axis, as measured by plasma corticosterone levels in mice with AIA and in naïve mice. In a subsequent dose-response study, we found that a single dose of 1 mg/kg liposomal prednisolone phosphate (PLP) was still equally effective in suppressing joint inflammation as 4 repeated once-daily injections of 10 mg/kg free PLP. Moreover, the 1 mg/kg liposomal PLP dose gave 22% less suppression of corticosterone levels than 10 mg/kg of liposomal PLP at day 14 of the AIA. In order to further optimize liposomal glucocorticoids, we compared liposomal PLP with liposomal budesonide phosphate (BUP) (1 mg/kg). At 1 day after treatment, liposomal BUP gave a significantly stronger suppression of joint swelling than liposomal PLP (lip. BUP 98% vs. lip. PLP 79%). Both formulations also gave a strong and lasting suppression of synovial infiltration in equal amounts. However, at day 21 after AIA, liposomal PLP still significantly suppressed corticosterone levels, whereas this suppression was not longer statistically significant for liposomal BUP. Conclusion: Liposomal delivery improves the safety of glucocorticoids by allowing for lower effective dosing. The safety of liposomal glucocorticoid may be further improved by encapsulating BUP rather than PLP.