The population in developed countries is ageing and the number of people experiencing joint-related conditions, such as osteoarthritis, is expected to increase. Joint replacements are currently the most effective treatment for severe joint conditions and although many of these procedures are successful, infection developing after the procedure is still an issue, requiring complex and expensive revisions. Whilst incorporating a powdered antibiotic within the bone cement can reduce infection rates, the powder frequently agglomerates, resulting in poor antibiotic release characteristics and compromised mechanical performance of the cement. To overcome these issues, a novel delivery system consisting of antibiotic-loaded nano-sized liposomes was developed for inclusion into polymethyl methacrylate (PMMA) bone cement. This system was tested in a commercial cement (Palacos R) and consistently delivered a higher percentage (22%) of the incorporated antibiotic when compared to the powdered antibiotic cement (9%), meaning less antibiotic needs to be incorporated than with conventional cement. The novel system resulted in a controlled and gradual release of antibiotic over a longer, 30-day period and enhanced the toughness, bending strength and Vickers hardness of the cement, without altering its polymerization or molecular structure. This new material has the potential to significantly reduce infections in cemented joint replacements leading to enhanced patient quality of life and reduced healthcare costs. © 2015 Wiley Periodicals, Inc. J Biomed Mater Res Part B: Appl Biomater, 104B: 1510-1524, 2016.