Liposomes can be prepared by a combination of reverse phase evaporation and sequential extrusion through polycarbonate membranes. The vesicles have diameters in the range 0.05-0.5 micron and are mostly unilamellar as indicated by electon microscopy, capture volume, and availability of reactive groups to periodate oxidation. Sequential extrusion leads to a decrease in the encapsulation efficiency by 2-4-fold, depending upon the lipid composition. The inclusion of cholesterol at a 1 : 1 molar ratio of cholesterol-to-phospholipid increases both the mean size and the size heterogeneity of the liposomes as measured by negative-stain electron microscopy. The mean size of vesicles with an equal molar ratio of cholesterol-to-phospholipid after extrusion through a 0.1 micron membrane is 0.140 micron. Vesicles composed of phosphatidylglycerol/phosphatidylcholine (1 : 4) have a mean size of 0.08 micron after extrusion through a 0.1 micron membrane. The intermediate-size (0.1-0.2 micron) vesicles formed by this process have an aqueous space-to-lipid ratio of 3 : 5 and capture between 12 and 25% of the aqueous phase. The procedure is relatively simple, rapid, and yields almost quantitative recovery of vesicles that encapsulate a large percentage of the total aqueous space.