Liposomes have substantial potential to deliver bioactive compounds in foods. However, the oxidative degradation and physical instability of liposomes limit their utilization. This research evaluated the ability of chitosan and rosmarinic acid and its esters to increase the physical and oxidative stability of liposomes. Particle size analysis studies showed that the physical stability of liposomes was enhanced by depositing a layer of cationic chitosan onto the negatively charged liposomes. The combination of octadecyl rosmarinate (40 microM) and chitosan coating resulted in significantly greater inhibition of lipid oxidation in the liposomes compared to chitoson or octadecyl rosmarinate alone. Increasing the concentrations of octadecyl rosmarinate to a concentration of 40 microM in the chitosan-coated liposomes decreased lipid oxidation. Only butyl rosmarinate exhibited stronger antioxidant activity than free rosmarinic acid. Eicosyl rosmarinate (20 carbons) had lower antioxidant activity than all other rosmarinic acid derivatives. These results suggest that by combining the inclusion of appropriate antioxidants such as rosmarinic acid and the deposition of a chitosan coating onto the surface of liposomes may significantly increase the oxidative and physical stability of liposomes