A unique method for formulation of plasmid DNA with phospholipids has been devised for the purpose of producing vehicles that can mediate gene delivery and transfection of living cells. The polycation, spermine, was used to condense plasmid DNA within a water-in-chloroform emulsion stabilized by phospholipids. After organic solvent removal, the particles formed could be extruded to a number average size of about 200 nm and retained DNA that was protected from nuclease digestion. This resulted in a relatively high protected DNA-to-lipid ratio of approximately 1 microg DNA/micromol lipid. The size distribution of the preparation was relatively homogeneous as judged by light microscopy and quasi-elastic light scattering. Electron microscopic studies showed structural heterogeneity, but suggested that at least some of the plasmid DNA in this preparation was in the form of the previously observed spermine-condensed bent rods and toroids and was encapsulated within liposomal membranes. Preparations with the fusogenic phospholipid composition, 1, 2-dioleoyl-sn-glycero-3-phosphoethanolamine-N-dodecanoyl/ 1, 2-dioleoyl-sn-glycero-3-phosphocholine, showed transfection activity for several cells lines, particularly OVCAR-3 cells. The transfection activity sedimented with the lipid during centrifugation, confirming the association of active plasmid DNA with phospholipids. Transfection efficiency in culture was found to be of the same order of magnitude as cationic lipoplexes but much less toxic to the cells. Significant transfection of OVCAR-3 cells in tissue culture could also be observed, even in the presence of the intraperitoneal fluid from a mouse with an OVCAR-3 ascites tumor. These data indicate a new type of liposomal gene delivery system devoid of cationic lipids, phosphatidylethanolamine, cationic polymers and viral components.