A liposome-encapsulated formulation of lurtotecan with antineoplastic activity. Lurtotecan, a semisynthetic analogue of camptothecin, selectively stabilizes the topoisomerase I-DNA covalent complex and forms an enzyme-drug-DNA ternary complex during S phase of the cell cycle, thereby inhibiting religation of topoisomerase I-mediated single-stranded DNA breaks. This ultimately results in an inhibition of DNA replication, inducing double-stranded DNA breakages, obstruction of RNA and protein synthesis and triggering apoptosis. Furthermore, this agent also stimulates degradation of topoisomerase I, likely mediated through ubiquitin-proteasomal pathway. Liposomal delivery of lurtotecan improves its penetration and delivery into tumors while lowering systemic side effects.