Although hydrophilic small molecule drugs are widely used in the clinic, their rapid clearance, suboptimal biodistribution, low intracellular absorption and toxicity can limit their therapeutic efficacy. These drawbacks can potentially be overcome by loading the drug into delivery systems, particularly liposomes; however, low encapsulation efficiency usually results. Many strategies are available to improve both the drug encapsulation efficiency and delivery to the target site to reduce side effects. For encapsulation, passive and active strategies are available. Passive strategies encompass the proper selection of the composition of the formulation, zeta potential, particle size and preparation method. Moreover, many weak acids and bases, such as doxorubicin, can be actively loaded with high efficiency. It is highly desirable that once the drug is encapsulated, it should be released preferentially at the target site, resulting in an optimal therapeutic effect devoid of side effects. For this purpose, targeted and triggered delivery approaches are available. The rapidly increasing knowledge of the many overexpressed biochemical makers in pathological sites, reviewed herein, has enabled the development of liposomes decorated with ligands for cell-surface receptors and active delivery. Furthermore, many liposomal formulations have been designed to actively release their content in response to specific stimuli, such as a pH decrease, heat, external alternating magnetic field, ultrasound or light. More than half a century after the discovery of liposomes, some hydrophilic small molecule drugs loaded in liposomes with high encapsulation efficiency are available on the market. However, targeted liposomes or formulations able to deliver the drug after a stimulus are not yet a reality in the clinic and are still awaited.