Liposomes have a decade-long clinical presence as nanoscale delivery systems of encapsulated anthracycline molecules. However, their use as delivery systems of nanoparticles is still in the preclinical development stages. Liposome-nanoparticle hybrid constructs present great opportunities in terms of nanoscale delivery system engineering for combinatory therapeutic-imaging modalities. Moreover, many novel materials are being developed in nanotechnology laboratories that often require methodologies to enhance their compatibility with the biological milieu in vitro and in vivo. Liposomes are structurally suitable to make nanoparticles biocompatible and offer a clinically proven, versatile platform for the further enhancement of pharmacological efficacy. Small iron oxide nanoparticles, quantum dots, liposomes, silica and polystyrene nanoparticles have been incorporated into liposomes for a variety of different applications. In this review, all such liposome-nanoparticle hybrid systems are described, both in terms of their structural characteristics and the potential they offer as diagnostic and therapeutic multimodality agents. © 2007 Future Medicine Ltd.