Liposome-encapsulated muramyl tripeptide phosphatidylethanolamine (L-MTP-PE), a new biologic response modifier, was designed to target the immunomodulator to monocytes and macrophages. Human monocytes/macrophages phagocytize L-MTP-PE, with subsequent upregulation of interleukin (IL)-1 alpha, IL-1 beta, IL-6, IL-8, tumor necrosis factor (TNF)-alpha, and monocyte chemotactic and activating factor genes and with the production and secretion of these cytokines in vitro. L-MTP-PE-activated macrophages kill tumor but not normal cells in vitro. Following i.v. infusion of L-MTP-PE into cancer patients, its uptake was demonstrated in liver, spleen, lung, and in and around metastases to lung. We also investigated whether L-MTP-PE therapy administered in a neoadjuvant setting could improve the disease-free interval in relapsed osteosarcoma patients with lung metastasis. Patients received either a 12- or 24-week course of L-MTP-PE after surgical removal of all metastases. Following L-MTP-PE infusion, induction of circulating TNF-alpha, IL-6, neopterin, and C-reactive protein was demonstrated. Disease-free intervals were calculated from the day of surgery to the day of relapse in each group and were compared with the disease-free interval for a historical control group. Those patients receiving 24 weeks of L-MTP-PE showed a significant (p < 0.03) prolongation in time to relapse. These data indicate that L-MTP-PE is an active agent against osteosarcoma and warrants further investigation in an adjuvant setting.