Small unilamellar vesicles (75-100 nm diameter) and large liposomes (greater than 1 micron in diameter) were prepared containing the lamB protein, an outer membrane protein of Escherichia coli and Shigella which serves as the receptor for bacteriophage lambda. Bacteriophage were observed to bind to these liposomes and vesicles by their tails and in most cases the heads of the bound bacteriophage appeared empty or partially empty of DNA. The lambda DNA was usually only partially ejected from the bacteriophage head when small unilamellar liposomes were used, presumably because the vesicles are too small to contain all the DNA. The partially ejected DNA was not susceptible to DNase unless the vesicle bilayer was first disrupted suggesting that DNA injection of phage DNA into the vesicle had occurred. After disruption of these vesicles on electron microscope grids, the bacteriophage are seen to have partially empty heads and a small mass of DNA associated with their tails. Using larger liposomes prepared by the fusion of lamB bearing vesicles with polyethylene glycol and n-hexyl bromide, the heads of most of the bound bacteriophage appeared to be completely empty of DNA. Disruption of these preparations on electron microscope grids revealed circular arrays of empty-headed bacteriophage surrounding DNA which had apparently been contained within the intact liposomes. These results indicate that high molecular weight DNA can be entrapped within liposomes with high efficiency by ejection from bacteriophage lambda. The possible use of these DNA-containing liposomes to facilitate gene transfer in eukaryotic cells is discussed.