Here, we sought to elucidate the role of CAR (a cyclic peptide) in the accumulation and distribution of fasudil, a drug for pulmonary arterial hypertension (PAH), in rat lungs and in producing pulmonary specific vasodilation in PAH rats. As such, we prepared liposomes of fasudil and CAR-conjugated liposomal fasudil and assessed the liposomes for CAR conjugation, physical properties, entrapment efficiencies, in vitro release profiles, and stabilities upon incubation in cell culture media, storage, and aerosolization. We also studied the cellular uptake of fasudil in different formulations, quantified heparan sulfate (HS) in pulmonary arterial smooth muscle cells (PASMCs), and investigated the distribution of the liposomes in the lungs of PAH rats. We assessed the drug accumulation in a close and recirculating isolated perfused rat lung model and studied the pharmacokinetics and pharmacological efficacy of the drug and formulations in Sugen/ hypoxia-induced PAH rats. The entrapment efficiency of the liposomal fasudil was 95.5 ± 4.5%, and the cumulative release was 93.95 ± 6.22%. The uptake of CAR liposomes by pulmonary arterial cells and their distribution and accumulation in the lungs were much greater than those of no-CAR-liposomes. CAR-induced increase in the cellular uptake was associated with an increase in HS expression by rat PAH-PASMCs. CAR, when conjugated with liposomal fasudil and given via an intratracheal instillation, extended the elimination half-life of the drug by four-fold compared with fasudil-in-no-CAR-liposomes given via the same route. CAR-conjugated liposomal fasudil, as opposed to fasudil-in-no-CAR-liposomes and CAR pretreatment followed by *