Regional (intratracheal or aerosol) delivery of cationic liposome-DNA complexes for gene therapy of lung disease offers distinct advantages over systemic (intravenous) administration. However, optimal formulations for early lung cancer treatment have not been established. Therefore, we investigated >50 different liposome and micelle formulations for factors that may affect their transcription efficiency and tested the ideal formulations in an in vivo mouse model. Our data showed that cationic liposomes were generally more effective at transfecting genes than were micelles of the same lipid composition, thus suggesting a role for the bilayer structure in facilitating transfection. In addition, the transfection efficiency of liposome-delivered genes was highly dependent upon the lipid composition, lipid/DNA ratio, particle size of the liposome-DNA complex, and cell lines used. By optimizing these factors in vitro and in vivo, we developed a novel liposome formulation (DP3) suitable for intratracheal administration. Using G67 liposome as control, we found that DP3 was more effective than G67 in vitro and as effective as G67 at both preventing lung tumor growth and prolonging survival in our lung cancer mouse model. We observed a positive correlation between the in vitro p53 function and the in vivo antitumoral activities of liposome-p53 formulations, which had not been reported previously in studies of an intravenous liposome gene delivery system. This correlation may facilitate the development and optimization of a liposome-p53 formulation for aerosol use in lung cancer patients.