Phosphatidylcholine vesicles provide reaction compartments for synthesis of size-quantized CdS nanocrystals of dimension predicted to within 2.5 Angstrom on the basis of initial encapsulated CdCl2 concentration and vesicle diameter. Vesicle formation by detergent dialysis of phosphatidylcholine/hexylglucoside mixed micelles yields highly monodisperse lipid capsules within which monodisperse CdS nanoparticles are precipitated with sulfide. Size-quantized CdS nanocrystals, with diameters ranging from 20 to 60 Angstrom, have been produced with typical standard deviations about the mean diameter of +/-8%, as measured by transmission electron microscopy. Spectrophotometric and photoluminescence spectra are consistent with highly crystalline, monodisperse particles with few core or surface defects. Measured exciton energies show excellent agreement with data in the literature. The empirical pseudopotential model presented by Krishna and Friesner for a cubic CdS lattice, correcting for experimentally measured lattice contractions, best fits the exciton energy versus particle diameter data.