A novel type of pH-sensitive paramagnetic contrast agent is introduced; a low molecular weight gadolinium (Gd) chelate (GdDTPA-BMA) encapsulated within pH-sensitive liposomes. The in vitro relaxometric properties of the liposomal Gd chelate were shown to be a function of the pH in the liposomal dispersion and the membrane composition. Only a minor pH-dependency of the T1 relaxivity (r1) was observed for liposomal GdDTPA-BMA composed of the unsaturated lipids dioleoyl phosphatidyl ethanolamine (DOPE) and oleic acid (OA). On the other hand, the r1 of GdDTPA-BMA encapsulated within saturated dipalmitoyl phosphatidyl ethanolamine/palmitic acid (DPPE/PA) liposomes demonstrated a strong pH-dependency. At physiological pH and above, the r1 of this system was significantly lowered compared to that of non-liposomal Gd chelate, which was explained by an exchange limited relaxation process. Lowering the pH below physiological value, however, gave a sharp and 6-7 fold increase in r1, due to liposome destabilisation and subsequent leakage of entrapped GdDTPA-BMA. The pH-sensitivity of the DPPE/PA liposome system was confirmed in an in vitro magnetic resonance imaging (MRI) phantom study.