The stability and activity of the HIV cell-penetrating TAT peptide (TATp) on the surface of TATp-modified micelles and liposomes in relation to its proteolytic cleavage was investigated. TATp moieties were attached to the surface of these nanocarriers using TATp modified with a conjugate of phosphatidyl ethanolamine with a 'short' PEG (PEG-PE). Following pre-incubation with trypsin, elastase, or collagenase, the proteolytic stability of TATp on the surface of these modified carriers was studied by HPLC with fluorescence detection using fluorenylmethyl chloroformate (FMOC) labeling. All tested enzymes produced a dose-dependent cleavage of TATp as shown by the presence of TATp Arg-Arg fragments. Inhibition of TATp cleavage occurred when these TATp-micelles were modified by the addition of longer PEG-PE blocks, indicating an effective shielding of TATp from proteolysis by these blocks. TATp-modified carriers were also tested for their ability to accumulate in EL-4, HeLa, and B16-F10 cells. Trypsin treatment of TATp-modified liposomes and micelles resulted in decreased uptake and cell interaction, as measured by fluorescence microscopy and fluorescence-activated cell sorting techniques. Furthermore, a decrease in the cytotoxicity of TATp-modified liposomes loaded with doxorubicin (Doxil) was observed following trypsin treatment. In conclusion, steric shielding of TATp is essential to ensure its in vivo therapeutic function.