The present invention provides a method for preventing or treating disease caused by retroviruses, particularly human immunodeficiency virus. Liposomes are prepared containing phosphorylated derivatives of nucleosides which act as chain-terminators of viral DNA. The phosphorylated nucleosides per se, without encapsulation in liposomes, do not readily enter cells. However, they are found to be effective if encapsulated in liposomes because they remain in liposomes longer, they do not escape easily from cells, and they constitute the active form for incorporation in viral DNA chains. When administered to a host, the liposomes are taken up by endocytic and phagocytic cells, which are important reservoirs of HIV infection.; If coated with an appropriate ligand, such as an immunoglobulin molecule, liposomes containing the phosphorylated nucleosides can be directed to phagocytic cells, CD4-positive cells, or infected host cells.