We have previously shown that the stability and permeability of peptides can be greatly improved by conjugation with lipoamino acids such as 2-aminododecanoic acid (C12Laa). However, the increase in lipophilicity which this conjugation provides can also cause a significant decrease in the compound's water solubility. In this study, we coupled C12Laa to the N-terminus of endomorphin1 (Endo-1, Tyr-Pro-Trp-Phe-NH(2)), and addressed its solubility issue by formulating C12Laa-Endo-1 into phosphatidylcholine liposomes. The aqueous solubility of the lipidic analogue was greatly improved, facilitating the accurate analysis of the compound in in vitro assays. The metabolic stability and in vitro endothelial permeability of the C12Laa-Endo-1 liposomal formulation was assessed using Caco-2 cells, and compared with the formulation of the parent peptide Endo-1. The liposome-encapsulated C12Laa-Endo exhibited significant increases in both stability and permeability. These results suggest that the combination of chemical modification and liposome formulation has great potentials in improving the bioavailability of neuroactive peptides.