RNA interference induced by double-stranded, small interfering RNA (siRNA) molecules has attracted great attention as a genetic therapeutic approach. Despite major advances in this field, new nanoparticle formulations are required for in vivo delivery of siRNA, particularly for tissue-specific delivery of siRNA reagents. We have developed and optimized LYR nanocomplex formulations for siRNA delivery that consist of a liposome (DOTMA/DOPE; L) and a targeting peptide (K₁₆GACYGLPHKFCG; Y) which self-assemble on mixing at optimal ratios with siRNA (R). Biophysical measurements indicated that LYR nanocomplexes were strongly cationic, mainly spherical particles of less than 100 nm. These formulations packaged and protected siRNA on incubation with RNAseA with >90% intact siRNA recovery. In addition, intact siRNA was recovered from LYRs upon heparin treatment. A critical synergy was observed between the lipid and peptide components for LYR particle stability and transfection efficiency. To evaluate targeting, transfections were compared with non-targeted formulations containing K₁₆ with no targeting ligand. Gene knockdown efficiencies with targeted formulations were more than two-fold better in all cell lines tested (p < 0.01). LYR formulations with liposomes containing DOTMA, which has an 18-carbon (C18) alkyl tail, were significantly better in silencing than formulations containing cationic lipids with shorter alkyl tails. LYRs with siRNA against endogenous luciferase and GAPDH were successful in silencing these genes in 3 cell lines (1HAEo- human airway epithelial, B104 rat neuroblastoma, Neuro2A-Luc mouse neuroblastoma) in vitro with 80% efficiency, similar in efficiency to Lipofectamine 2000. Confocal microscopy analysis with LYRs containing fluorescently labelled siRNA (Cy3) showed that the siRNA was located in the perinuclear region of the cytoplasm, where the RNA-induced silencing complex (RISC) is likely to be found. The LYR formulations may have applications for the further development of siRNA-based therapeutics.