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Current pharmacological interventions for pulmonary arterial hypertension (PAH) require continuous infusions, multiple inhalations, or oral administration of drugs that act on various pathways involved in the pathogenesis of PAH. However, invasive methods of administration, short duration of action, and lack of pulmonary selectivity result in noncompliance and poor patient outcomes. In this study, we tested the hypothesis that encapsulation of an investigational anti-PAH molecule fasudil (HA-1077), a Rho-kinase inhibitor, into liposomal vesicles results in prolonged vasodilation in distal pulmonary arterioles. Liposomes were prepared by hydration and extrusion method and fasudil was loaded by ammonium sulfate-induced transmembrane electrochemical gradient. Liposomes were then characterized for various physicochemical properties. Optimized formulations were tested for pulmonary absorption and their pharmacological efficacy in a monocrotaline (MCT) induced rat model of PAH. The entrapment efficiency of optimized liposomal fasudil formulations was between 68.1±0.8% and 73.6±2.3%, and the cumulative release at 37°C was 98–99% over a period of 5 days. Compared to intravenous (IV) fasudil, a ~10 fold increase in the terminal plasma half-life was observed when liposomal fasudil was administered as aerosols. The t1/2 of IV fasudil was 0.39±0.12 h. and when given as liposomes via pulmonary route, the t1/2 extended to 4.71±0.72 h. One h after intratracheal instillation of liposomal fasudil, mean pulmonary arterial pressure (MPAP) was reduced by 37.6±5.7% and continued to decrease for about 3 h, suggesting that liposomal formulations produced pulmonary preferential vasodilation in MCT induced PAH rats. Overall, this study established the proof-of-principle that aerosolized liposomal fasudil is a feasible option for a non-invasive, controlled release and pulmonary preferential treatment of PAH.