Furthermore, PEGylation, the inclusion in the formulation of a protective “stealth sheath” of poly(ethylene glycol) around carrier particles, is widely used to increase circulation time in the bloodstream and hence efficacy. Together, these themes highlight the importance of mechanistic and structural understanding of ITZ incorporation into liposomes both with and without PEGylation because it can provide a potential foundation for the rational design of LDS-based systems for delivery of ITZ, using alternate protective polymers or formulations. Here we have combined atomistic simulations, cryo-TEM, Langmuir film balance, and fluorescence quenching experiments to explore how ITZ interacts with both pristine and PEGylated liposomes. We found that the drug can be incorporated into conventional and PEGylated liposomes for drug concentrations up to 15 mol % without phase separation. We observed that, in addition to its protective properties, PEGylation significantly increases the stability of liposomes that host ITZ. In a 1-palmitoyl-2-oleoyl-sn-glycero-3-phosphocholine (POPC) bilayer without PEGylation, ITZ was found to reside inside the lipid bilayer between the glycerol and the double-bond regions of POPC, adopting a largely parallel orientation along the membrane surface. In a PEGylated liposome, ITZ partitions mainly to the PEG layer. The results provide a solid basis for further development of liposome-based delivery systems.