Purpose. To employ Doxorubicin-loaded liposomes, modified with YSA-peptide to target EphA2, to reduce adverse effects against primary bone cells and maximize toxicity against Saos-2 osteosarcoma cells. Methods. PEGylated liposomes were prepared by thin film method using Dipalmitoylphosphatidylcholine (DPPC), cholesterol and distearylphosphatidylethanolamine-polyethyleneglycol conjugate (DSPE-mPEG) in 67.9:29.1:3 M ratios, and loaded with DOX (L-DOX) by pH-gradient method. Targeted liposomes (YSA-L-DOX), were prepared by conjugating YSA-peptide to DSPE-mPEG. Liposomes were physicochemically characterized and tested in cellular toxicity assays. Results. YSA conjugation efficiency was >98%. Size and polydispersity index of both L-DOX and YSA-L-DOX were around 88 nm and 0.188, respectively. Both had similar zeta potential, and 85% DOX loading efficiencies. DOX release kinetics followed the Korsmeyer-Peppa model, and showed comparable release for both formulations from 1–8 h, and a plateau of 29% after 48 h. Both formulations could be stably stored for ≥6 months at 4°C in the dark. Toxicity assays showed a significant 1.91-fold higher cytotoxicity compared to free DOX in the Saos-2 cells, and 2-fold lesser toxicity in primary bone cells compared to the Saos-2 cells. Cellular uptake studies showed higher and more nuclear uptake in YSA-L-DOX compared to L-DOX treated cells. Conclusions. YSA-L-DOX vesicles might be effective for targeted treatment of osteosarcoma.