17-Allylamino-17-demethoxy geldanamycin (17-AAG), an inhibitor of heat shock protein 90 (Hsp90) function, is being developed as antitumor drug in patients with breast cancer. However, water-insolubility and hepatotoxicity limit its use. The purpose of this study was to begin to address these issues by determining whether 17-AAG can be formulated in long-circulating (PEGylated), biocompatible and biodegradable sterically stabilized phospholipid nanomicelles (SSM) to which vasoactive intestinal peptide (VIP) was grafted as an active targeting moiety and, if so, whether these nanomicelles are cytotoxic to MCF-7 human breast cancer cells. We found that particle size of 17-AAG loaded in VIP surface-grafted SSM was 16+/-1 nm and drug content was 97+/-2% (300 microg/ml). Cytotoxicity of 17-AAG loaded in VIP surface-grafted SSM to MCF-7 cells was significantly higher than that of 17-AAG loaded in non-targeted SSM (p<0.05) and similar to that of 17-AAG dissolved in dimethylsulfoxide. Collectively, these data demonstrate that 17-AAG is solubilized at therapeutically relevant concentrations in actively targeted VIP surface-grafted SSM. Cytotoxicity of these nanomicelles to MCF-7 cells is retained implying high affinity VIP receptors overexpressed on these cells mediate, in part, their intracellular uptake thereby amplifying drug potency. We propose that 17-AAG loaded in VIP surface-grafted SSM should be further developed as actively targeted nanomedicine for breast cancer.