Lung cancer is the leading cause of cancer-related deaths worldwide. Non-small-cell lung cancer (NSCLC) is the most common type accounting for 84% of all lung cancers. Paclitaxel (PAC) is a widely used drug in the treatment of a broad spectrum of human cancers, including lung. While efficacious, PAC generally is not well tolerated and its limitations include low aqueous solubility, and significant toxicity. To overcome the dose-related toxicity of solvent-based PAC, we utilized bovine colostrum-derived exosomes as a delivery vehicle for PAC for the treatment of lung cancer. Colostrum provided higher yield of exosomes and could be loaded with higher amount of PAC compared to mature milk. Exosomal formulation of PAC (ExoPAC) showed higher antiproliferative activity and inhibition of colony formation against A549 cells compared with PAC alone, and also showed antiproliferative activity against a drug-resistant variant of A549. To further enhance its efficacy, exosomes were attached with a tumor-targeting ligand, folic acid (FA). FA-ExoPAC given orally showed significant inhibition (>50%) of subcutaneous tumor xenograft while similar doses of PAC showed insignificant inhibition. In the orthotopic lung cancer model, oral dosing of FA-ExoPAC achieved greater efficacy (55% growth inhibition) than traditional i.v. PAC (24–32% growth inhibition) and similar efficacy as i.v. Abraxane (59% growth inhibition). The FA-ExoPAC given i.v. exceeded the therapeutic efficacy of Abraxane (76% growth inhibition). Finally, wild-type animals treated with p.o. ExoPAC did not show gross, systemic or immunotoxicity. Solvent-based PAC caused immunotoxicity which was either reduced or completely mitigated by its exosomal formulations. These studies show that a tumor-targeted oral formulation of PAC (FA-ExoPAC) significantly improved the overall efficacy and safety profile while providing a user-friendly, cost-effective alternative to bolus i.v. PAC and i.v. Abraxane.