CLX (celecoxib) is a highly hydrophobic non-steroidal anti-inflammatory drug with high plasma protein binding. We describe here the encapsulation of CLX in MLVs (multilamellar vesicles) composed of DSPC (1,2-distearoyl-sn-glycero-3-phosphocholine) and variable amounts of cholesterol. The effects of cholesterol content on liposome size, percentage drug loading and in vitro drug release profiles were investigated. Differential scanning calorimetry and FTIR (Fourier-transform infrared) spectroscopy were used to determine molecular interactions between CLX, cholesterol and DSPC. The phase transition temperature (T-m) of vesicles was reduced in a synergistic manner in the presence of both CLX and cholesterol. Encapsulation efficiency, loading and release of CLX decreased with increasing cholesterol content. FTIR results indicated that this decrease was due to a competition between CLX and cholesterol for the co-operativity region of the phospholipids. In the presence of cholesterol, CLX was pushed further into the hydrophobic core of the bilayer. However, MLVs prepared with DSPC only (without cholesterol) exhibited the lowest ability for drug retention after 72 h. Our results indicated that CLX, without the requirement of modifications to enhance solubilization, can be encapsulated and released from liposomal formulations. This method of drug delivery may be used to circumvent the low bioavailability and systemic side effects of oral CLX formulations.