Cationic liposome–DNA (CL–DNA) complexes are being pursued as nonviral gene delivery systems for use in applications that include clinic trials. However, to compete with viral vectors for systemic delivery in vivo, their efficiencies and pharmacokinetics need to be improved. The addition of poly (ethylene glycol)-lipids (PEGylation) prolongs circulation lifetimes of liposomes, but inhibits cellular uptake and endosomal escape of CL–DNA complexes. We show that this limits their transfection efficiency (TE) in a manner dependent on the amount of PEG-lipid, the lipid/DNA charge ratio, and the lipid membrane charge density. To improve endosomal escape of PEGylated CL–DNA complexes, we prepared an acid-labile PEG-lipid (HPEG2K-lipid, PEG MW 2000) which is designed to lose its PEG chains at the pH of late endosomes. The HPEG2K-lipid and a similar but acid-stable PEG-lipid were used to prepare PEGylated CL–DNA complexes. TLC and dynamic light scattering showed that HPEG2K-CL–DNA complexes are stable at pH 7.4 for more than 24 hours, but the PEG chains are cleaved at pH 5 within one hour, leading to complex aggregation. The acid-labile HPEG2K-CL–DNA complexes showed enhanced TE over complexes stabilized with the acid-stable PEG-lipid. Live-cell imaging showed that both types of complexes were internalized to quantitatively similar particle distributions within the first 2 hours of incubation with cells. Thus, we attribute the increased TE of the HPEG2K-CL–DNA complexes to efficient endosomal escape, enabled by the acid-labile HPEG2K-lipid which sheds its PEG chains in the low-pH environment of late endosomes, effectively switching on the electrostatic interactions that promote fusion of the membranes of complex and endosome.