PEP02 is a novel highly stable liposomal nanocarrier formulation of irinotecan. This randomized phase II study evaluated the efficacy and safety of single agent PEP02 compared with irinotecan or docetaxel in the second-line treatment of advanced oesophago-gastric (OG) cancer. Patients with locally advanced/metastatic disease who had failed one prior chemotherapy regimen were randomly assigned to PEP02 120 mg/m2, irinotecan 300 mg/m2 or docetaxel (Taxotere) 75 mg/m2 every 3 weeks. The primary end point was objective response rate (ORR). Simon's two-stage design was used and the ORR of interest was 20% (α = 0.05, type II error β = 0.10, null hypothesis of ORR was 5%). Forty-four patients per arm received treatment, and 124 were assessable for response. The ORR statistical threshold for the first stage was reached in all arms. In the intent-to-treat (ITT) population, ORRs were 13.6% (6/44), 6.8% (3/44) and 15.9% (7/44) in the PEP02, irinotecan and docetaxel arms, respectively. The median progression-free survival (PFS) and overall survival were similar between the trial arms. Commonest grade 3–4 adverse event reported was diarrhoea in the PEP02 and irinotecan groups (27.3% versus 18.2%). The ORR associated with PEP02 was comparable with docetaxel and numerically greater than that of irinotecan. PEP02 warrants further evaluation in the advanced gastric cancer setting.