Breast cancer is one of the most frequent cancer types within women population. Hydroxyurea (HU) is a chemotherapy compound for treatment of patients with cancer diagnosis, including breast cancer associated with several adverse effects. In this study, we applied nanotechnology to decreased drug side effects along with improvement of therapeutic index. Liposomation is widely used in modern pharmacological developments in order to enhance the effects of the drugs. To achieve this, in this study a mixture of phosphatidylcholine and cholesterol was made up and HU was added to the resultant mixture, was then pegylated using Polyethylene Glycol 2000 to increase resistance, applicability and solubility. The mean diameters of nanoliposomal and pegylated nanoliposomal HU were measured by Zeta sizer device and obtained about 402.5 and 338.2 nm. The efficiency of non-pegylated and pegylated liposomal HU was 70.8 and 64.2, respectively. Releasing HU in both formulations was estimated about 25.8 and 21.7 %. Also, this study investigated the cytotoxicity effect of nanoliposomal and pegylated nanoliposomal HU using MTT assay. Results of this investigation showed that the cytotoxic properties of pegylated HU was 3.6 % more than those non-pegylated form, while was 38.93 % more than ordinary from of HU. This study showed that the stability, releasing pattern and cytotoxicity of the pegylated nanoliposomal HU is better than that of nanoliposomal HU.