Acellular hemoglobin (Hb)-based O2 carriers (HBOCs) are being investigated as red blood cell (RBC) substitutes for use in transfusion medicine. However, commercial acellular HBOCs elicit both vasoconstriction and systemic hypertension which hampers their clinical use. In this study, it is hypothesized that encapsulation of Hb inside the aqueous core of liposomes should regulate the rates of NO dioxygenation and O2 release, which should in turn regulate its vasoactivity. To test this hypothesis, poly(ethylene glycol) (PEG) conjugated liposome-encapsulated Hb (PEG-LEHs) dispersions were prepared using human and bovine Hb. In this study, the rate constants for O2 dissociation, CO association, and NO dioxygenation were measured for free Hb and PEG-LEH dispersions using stopped-flow UVvisible spectroscopy, while vasoactivity was assessed in rat aortic ring strips using both endogenous and exogenous sources of NO. It was observed that PEG-LEH dispersions had lower O2 release and NO dioxygenation rate constants compared with acellular Hbs. However, no difference was observed in the CO association rate constants between free Hb and PEG-LEH dispersions. Furthermore, it was observed that Hb encapsulation inside vesicles prevented Hb dependent inhibition of NO-mediated vasodilation. In addition, the magnitude of the vasoconstrictive effects of Hb and PEG-LEH dispersions correlated with their respective rates of NO dioxygenation and O2 release. Overall, this study emphasizes the pivotal role Hb encapsulation plays in regulating gaseous ligand binding/release kinetics and the vasoactivity of Hb. (C) 2012 American Institute of Chemical Engineers Biotechnol. Prog., 2012