Solid tumors often contain hypoxic regions which are resistant to standard chemotherapy and radiotherapy. We have developed a liposomal delivery system for a prodrug of vinblastine (CPD100) which converts to the parent compound only in the presence of lower oxygen levels. As a part of this work we have developed and optimized two formulations of CPD100: one composed of sphingomyelin/cholesterol (55/45; mol/mol) (CPD100Li) and the other composed of sphingomyelin/cholesterol/PEG (55/40/5; mol/mol) (CPD100 PEGLi). We evaluated the antiproliferative effect of CPD100 and the two formulations against A549 non-small lung cancer cell. A549 cell line showed to be sensitive to CPD100 and the two formulations displayed a higher hypoxic: air cytotoxicity ratio compared to the pro-drug. CPD100 elimination from the circulation after injection in mouse was characterized by a very short circulation time (˜ 0.44 h), lower area under the curve (AUC) (33 μg h/mL) and high clearance (916 mL/h/kg) and lower volume of distribution (17.4 mL/kg).Total drug elimination from the circulation after the administration of liposomal formulation was characterized by prolonged circulation time (5.5 h) along with increase in the AUC (56 μg h/mL) for CPD100 Li and (9.5 h) with AUC (170 μg h/mL) for CPD100PEGLi. This was observed along with increase in volume of distribution and decrease in clearance for the liposomes. The systemic exposure of the free drug was much lower than that achieved with the liposomes. When evaluated for the efficacy in A549 xenograft model in mice, both the liposomes demonstrated excellent tumor suppression and reduction for 3 months. The blood chemistry panel and the comprehensive blood analysis showed no increase or decrease in the markers and blood count. In summary, the pharmacokinetic analysis along with the efficacy data emphasis on how the delivery vehicle modifies and enhances the accumulation of the drug and at the same time the increased systemic exposure is not related to toxicity.