The target cells for gene therapy of cystic fibrosis lung disease are the well differentiated cells that line airway lumens. Employing cultures of airway epithelial cells that grow like "islands" and exhibit a continuum of cellular differentiation, we studied the mechanisms that render well differentiated cells more difficult to transfect with cationic liposomes than poorly differentiated cells. The poorly differentiated cells at the edge of the islands were transfectable with liposome-DNA complexes (pCMVbeta:LipofectACE = 1:5 (w/w)), whereas the more differentiated cells in the center of the islands were not. Evaluation of the steps leading to lipid-mediated transfection revealed that edge cells bound more liposome-DNA complexes, in part due to a more negative surface charge (as measured by cationized ferritin binding), and that edge cells internalized more liposome-DNA complexes than central cells. Edge cells exhibited receptor-mediated endocytosis of LDL, pinocytosis of 10-nm microspheres, and phagocytosis of 2-microm microspheres, whereas central cells were only capable of receptor-mediated endocytosis. Cytochalasin B, which inhibited pinocytosis by 65% and phagocytosis by 93%, decreased edge cell liposome-DNA complex entry by 50%. Potassium depletion, which decreased phagocytosis by >90% but had no effect on pinocytosis, inhibited edge cell liposome-DNA complex entry by 71%. These results indicate that liposome-DNA complexes enter edge cells via phagocytosis and that this pathway is not detectable in central cells. In conclusion, both reduced negative surface charge and absence of phagocytosis internalization pathways in relatively differentiated cells may explain differentiation-dependent decrements in cationic liposome-mediated gene transfer in airway epithelia.