It would be desirable to develop antiviral agents that can be targeted to liver to enhance their antiviral effects and reduce nonhepatic toxicity. 2′,3′-Dideoxyguanosine (ddG) has been found to be a potent and selective antihepatitis B agent both in vitro and in vivo. To evaluate ddG and its liver-targeted analog, we synthesized a series of phosphatidyl-ddGs and incubated them with 2.2.15 cells, which chronically produce hepatitis B virus. 1,2-Dipalmitoylphosphatidyl- dideoxyguanosine (DPP-ddG) inhibited the production of hepatitis B virus (HBV) DNA in the culture medium by 90% at 4.5 mumol/L versus 9.1 mumol/L for ddG, while the liposome vehicle itself had no effect. To compare the efficacy of free ddG with its lipid prodrug in vivo, we treated woodchucks that were experimentally infected with woodchuck hepatitis virus (WHV) for 4 weeks by intraperitoneal injection of 2.6 mumol/kg/d of free ddG or liposomes containing 2.6 mumol/kg/d of DPP- ddG. Liposomal DPP-ddG reduced serum WHV DNA by 23- to 46-fold at the end of the fourth week, while free ddG reduced serum WHV DNA by 2.2- to 10.4-fold. Treatment with small unilamellar liposomes containing DPP- ddG is substantially more effective than free ddG in reducing WHV-DNA levels in serum in WHV-infected woodchucks. The data suggest that the use of lipid prodrugs to target the liver may be useful in enhancing antiviral therapy of hepatitis.