The objectives of this study were to develop high-performance liquid chromatography (HPLC) and antibacterial assays for ampicillin encapsulated in multilamellar liposomes (MLV) and investigate the physicochemical and antibacterial properties of ampicillin-liposome systems. The major findings were fourfold. First, ammonium acetate (0.575%) in methanol:water (450:550; v/v), adjusted to pH 7.2, was suitable as the mobile phase for the HPLC determinations of ampicillin in both aqueous and liposomal systems. This mobile phase also provided (alone or with additional methanol) complete dissolution of liposomal assay samples in a precolumn treatment that made all of the encapsulated drug available for chromatography. Multiple samples were assayed without any technical limitations. Second, the growth-inhibition antibacterial assay developed, which used the USP test organism Micrococcus Luteus and paper disks, was quantitative for both free and liposome- encapsulated ampicillin. Third, the physicochemical properties of encapsulated ampicillin include encapsulation efficiencies of 10 to 50% for liposome concentrations in the range 10-200 mM (lipid), and a single rate constant to sufficiently and quantitatively describe the diffusion of encapsulated ampicillin, with haft-lives in the range of 40 h. Fourth, the biological properties include the first direct evidence that encapsulated ampicillin retains full biological activity; that is, liposome-encapsulated ampicillin was active against extracellular bacterial colonies of Micrococcus luteus. Furthermore, encapsulation enhanced ampicillin stability. For example, free ampicillin in an aqueous solution that was stored for 5 weeks at 4 °C lost 50% of its initial activity, whereas liposome-encapsulated ampicillin (freed from unencapsulated drug) stored under the same conditions lost only 17% of its initial activity. The findings of this study, provide strong support for ampicillin-liposome formulations as valid dosage forms for this drug that are worthy of further experimental evaluations.