Present study was performed to evaluate the efficacy, toxicity and pharmacokinetics of antifungal drug nystatin incorporated in immunomodulator tuftsin-bearing liposomes. In vitro toxicity of free nystatin and nystatin incorporated in tuftsin-free or tuftsin-loaded liposomes was assessed by incubation of nystatin formulations with human erythrocytes. The toxicity profile of free nystatin and liposomal formulations of nystatin with or without tuftsin was also analyzed by monitoring the level of blood urea nitrogen (BUN) and serum creatinine in the treated BALB/c mice. The results of the present work showed that tuftsin-loaded nystatin liposomes like conventional nystatin liposomes exerted less toxicity to human erythrocytes as compared with free nystatin. Moreover, mice treated with tuftsin-loaded nystatin liposomes showed insignificant elevation in the biochemical values of serum creatinine and blood urea. The stability of nystatin liposomes upon incorporation of tuftsin was evaluated by monitoring the leakage of the entrapped drug in human serum. Tuftsin-loaded liposomes held nystatin for longer duration in the presence of serum than identical nystatin liposomes without tuftsin. Pharmacokinetics of the both tuftsin-free or tuftsin-loaded liposomal formulations nystatin was analyzed by determining the level of nystatin in the systemic circulation of mice at different time points. Mice injected with tuftsin-loaded nystatin liposomes showed higher level of the drug in the systemic circulation compared with those treated with conventional nystatin liposomes. The efficacy of tuftsin-loaded nystatin liposomes against A. fumigatus was evaluated by assessing the fungal burden in the lungs of treated mice. Treatment with tuftsin-loaded nystatin liposomes was most effective in eliminating fungal burden from lung tissues of infected mice compared to those treated with free nystatin or nystatin liposomes without tuftsin. The immunopotentiating activity, increased stability and less toxicity of tuftsin-incorporated nystatin liposomes, supports the idea for its prophylactic and therapeutic use in the clinical setting.