Mefloquine (Mef), a poorly soluble and highly bitter drug, has been used for malaria prophylaxis and treatment. The dosage form for Mef is mostly available as adult tablets, and thus children under the age of 5 suffer from poor medication adherence. We have developed a stable, rapidly dissolvable, and palatable pediatric formulation for Mef using liposomes composed of 1,2-distearoyl-sn-glycero-3-phosphocholine (DSPC) and cholesterol with a mean diameter of ~110 nm. Mef was actively loaded into the liposomes via an ammonium sulfate gradient using the solvent-assisted loading technology (SALT) developed in our lab. Complete loading of Mef inside the liposomal core was achieved at a high drug-to-lipid ratio (D/L) of 0.1-0.2 (w/w), and the final drug content in the formulation was ~8 mg/ml, well above the solubility of Mef (<0.6 mg/ml in simulated fluids). The strong bitterness of Mef was masked by the liposomal encapsulation as measured by an electronic tongue. Incubating the Mef-liposomes (Mef-Lipo) in the simulated gastric fluid (pH 1.2) and the simulated intestinal fluid containing 3 mM sodium taucholate (pH 6.8) induced changes in liposome size and the polydispersity, resulting in drug release (~40% in 2 h). However, no drug release from the Mef-Lipo was measured in the bile salt-free intestinal fluid or simulated saliva (0% in 3 h). These data suggest that drug release from the Mef-Lipo was mediated by a low pH and the presence of a surfactant. Pancreatic lipase did not degrade DSPC in the Mef-Lipo after 8 h of incubation nor induce Mef release from the liposomes, indicating that lipid digestion played a minor role for drug release from the Mef-Lipo. In order to improve long-term room temperature storage, the Mef-Lipo was lyophilized to obtain a solid formulation, which was completely dissolvable in water in 10 s and displayed similar in vitro profiles of release as the liquid form. The lyophilized Mef-Lipo was stable at room temperature for >3 months. In mice, orally delivered liquid and lyophilized Mef-Lipo displayed comparable absorption with bioavailability (BA) of 81-86%, while the absorption of the standard Mef suspension was significantly lower with BA of 70% and 20% decreased maximal plasma concentration and area under the curve. Our data suggest that the Mef-Lipo was a stable, palatable and bioavailable formulation that might be suitable for pediatric use.