To evaluate and compare anticancer therapeutic effect of palmitoyl ascorbate liposomes (PAL) and free ascorbic acid (AA). Liposomes incorporating palmitoyl ascorbate (PA) were prepared and evaluated for PA content by HPLC. To elucidate mechanism of action of cell death in vitro, effect of various H(2)O(2) scavengers and metal chelators on PA-mediated cytotoxicity was studied. Effect of various combinations of PAL and free AA on in vitro cytotoxicity was evaluated on 4T1 cells. In vivo, PAL formulation was modified with polyethylene glycol; effect of PEGylation on in vitro cytotoxicity was evaluated. Biodistribution of PEG-PAL formulation was investigated in female Balb/c mice bearing murine mammary carcinoma (4T1 cells). In vivo anticancer activity of PEG-PAL (PEG-PAL equivalent to 20 mg/kg of PA injected intravenously on alternate days) was compared with free AA therapy in same model. PEG-PAL treatment was significantly more effective than free AA treatment in slowing tumor growth. Nanoparticle formulations incorporating PA can kill cancer cells in vitro. The mechanism of PA cytotoxicity is based on production of extracellular reactive oxygen species and involves intracellular transition metals.