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This study describes a highly efficient method for encapsulating protein drugs into liposomes without using toxic solvents such as chloroform. Large unilamellar vesicles (LUVs) were formed by the ethanol injection method. The effects of composition of phospholipid, buffer concentration, incubation time, incubation temperature, drug loading, ethanol content, and the presence of poly(ethylene) glycol (PEG) lipids on the entrapment efficiency of protein were investigated. It was shown that these preformed LUVs could be induced to entrap protein drugs in the presence of ethanol. Protein could be efficiently encapsulated into liposomes. The interaction of the liposomes with proteins leads to the formation of multilamellar liposomes ranging in size from 70 to 120 nm, only slightly bigger than the parent LUVs from which they originated. Protein drugs were stable in the liposomal solution. There is no significant activity loss during the encapsulation process. The optimal encapsulation efficiency was achieved when 30% ∼ 40% ethanol was used in encapsulating protein drugs. Due to the steric hindrance, LUVs containing a PEG coating will dramatically reduce the encapsulation efficiency, even in liposomes containing very low amount of PEG. [ABSTRACT FROM AUTHOR]