Encapsulation of DNA (varying type and molecular weight) in vesicles (dehydration-rehydration vesicles; DRV) prepared from zwitterionic phospholipids using the dehydration-rehydration method was determined to be in the range of 10-90%. Encapsulation was dependent on the amount of DNA added but not its molecular weight. Zeta potential measurements of the DRV suggested that DNA was associated with the vesicles exterior, while small angle neutron scattering (SANS) studies indicated that DNA was trapped in the interlamellar water space between lipid bilayers-as evidenced by a slight decrease in bilayer thickness and an increase in d-spacing. Circular dichroism measurements determined the conformation of the DNA in the DRV was not the usual B-form but rather a structure more reminiscent of the less hydrated, C-form, supporting the suggestion that DNA was present in the interlamellar water space. DRV were successfully coated with chitosan as evidenced by SANS studies and zeta potential measurements. The amount of chitosan coating the DRV [quantified by ultra violet (UV)/Vis spectroscopy] was dependent upon the starting concentration of chitosan and independent of the presence of DNA. Chitosan-coated DRV containing DNA exhibited an improved size stability while 'empty' uncoated vesicles were poorly stable. A coating of chitosan reduced the amount of DNA leaking from the vesicles.