We report here a systematic study of the encapsulation of Fe₃O₄ nanoparticles (NP) in dipalmitoyl phosphatidylcholine (DPPC) vesicles. The preparation of these vesicles was done by a reverse-phase evaporation method. We explored the effects of varying lipid and NP concentrations on the resulting lipid morphologies. We were able to obtain various morphologies; that resemble those of lipid-water system. Increasing NP concentration affects the phase diagram significantly, and can govern the resulting lipid morphology in a manner similar to increasing effective lipid concentration. With appropriate lipid and NP concentrations, high density loading of NPs in the lipid vesicles is achievable (see figure below for TEM images). We also report other morphological phenomena. If we interrupt the vesicle formation kinetically, we obtain incomplete closure of lipid vesicles with the encapsulated NP spilling out. We also observed the vesicle fusion under high centrifugal force.