The purpose of this work was to develop an optimized liposomal formulation of topotecan for use in the treatment of patients with neuroblastoma. Drug exposure time studies were used to determine that topotecan (Hycamtin) exhibited great cytotoxic activity against SK‐N‐SH, IMR‐32 and LAN‐1 neuroblastoma human cell lines. Sphingomyelin (SM)/cholesterol (Chol) and 1,2‐distearoyl‐sn‐glycero‐3‐phosphocholine (DSPC)/Chol liposomes were prepared using extrusion methods and then loaded with topotecan by pH gradient and copper‐drug complexation. In vitro studies showed that SM/Chol liposomes retained topotecan significantly better than DSPC/Chol liposomes. Decreasing the drug‐to‐lipid ratio engendered significant increases in drug retention. Dose‐range finding studies on NRG mice indicated that an optimized SM/Chol liposomal formulation of topotecan prepared with a final drug‐to‐lipid ratio of 0.025 (mol: mol) was better tolerated than the previously described DSPC/Chol topotecan formulation. Pharmacokinetic studies showed that the optimized SM/Chol liposomal topotecan exhibited a 10‐fold increase in plasma half‐life and a 1000‐fold increase in AUC0–24 h when compared with Hycamtin administered at equivalent doses (5 mg/kg). In contrast to the great extension in exposure time, SM/Chol liposomal topotecan increased the life span of mice with established LAN‐1 neuroblastoma tumors only modestly in a subcutaneous and systemic model. The extension in exposure time may still not be sufficient and the formulation may require further optimization. In the future, liposomal topotecan will be assessed in combination with high‐dose radiotherapy such as 131I‐metaiodobenzylguanidine, and immunotherapy treatment modalities currently used in neuroblastoma therapy. The manuscript presents the development of a liposomal formulation of topotecan as a treatment for high‐risk neuroblastoma. The liposomal formulation exhibited improved therapeutic activity compared to two‐times the dose of the current clinically available topotecan (Hycamtin) in a subcutaneous as well as in a systemic neuroblastoma mouse model. This is the first report assessing the therapeutic activity of copper based liposomal topotecan in animal models of neuroblastoma.