Amphotericin B (AmB) was first approved by the US Food and Drug Administration in 1959 with sodium deoxycholate (DAmB, Fungizone®). Extensive toxicities associated with the drug led to the development of lipid formulations of AmB, including liposomal amphotericin B (L-AmB, AmBisome®). Phase I studies as well as comparative Phase III clinical trials indicate that L-AmB is associated with less nephrotoxicity and reduced infusion-related toxicity. There is, however, no recent comprehensive review of the safety and tolerability of L-AmB. This article reviews the safety, tolerability and the mechanisms of the major toxicities associated with L-AmB, including nephrotoxicity, infusion-related reactions (IRRs), anemia and thrombocytopenia, and hepatic abnormalities. The article further discusses the mechanism of action and pharmacokinetics of L-AmB. L-AmB is a broad-spectrum antifungal agent that has significantly reduced toxicities compared to its predecessor, DAmB.