A promising strategy for improving the effectiveness, specificity and safety of cancer treatment is targeted medication delivery. Prostate-specific membrane antigen (PSMA) is an effective biomarker for tracking and treating prostate cancer. In this study, we developed a PSMA-targeted drug delivery system by modifying PEGylated liposomal doxorubicin (PLD) with 2-(3-((S)-5-amino-1-carboxypentyl) ureido) pentanedioic acid (ACUPA), a small-molecule PSMA inhibitor, to enhance tumor targeting and therapeutic outcomes. The physicochemical characterization of ACUPA-functionalized PLD (ACUPA-PLD) confirmed successful conjugation, with a slight increase in particle size and a minor decrease in surface charge compared to unmodified PLD. In vitro studies demonstrated that ACUPA-PLD exhibited significantly enhanced cellular uptake and cytotoxicity in PSMA-expressing LNCaP prostate cancer cells compared to non-targeted PLD, whereas PSMA-negative PC3 cells showed no significant difference in uptake or cytotoxicity. Flow cytometry and fluorescence-based assays confirmed PSMA-mediated internalization of ACUPA-PLD. In vivo biodistribution studies in a LNCaP xenograft nude mouse model revealed that ACUPA-PLD accumulated preferentially in tumor tissues. Pharmacokinetic analysis indicated that ACUPA functionalization slightly reduced the half-life of PLD without significantly altering its clearance profile. Chemotherapy studies demonstrated that ACUPA-PLD exhibited superior tumor growth inhibition compared to non-targeted PLD, supporting the potential of ACUPA-mediated targeting to improve the therapeutic index of liposomal chemotherapy. These findings suggest that ACUPA-functionalized liposomes represent a promising approach for PSMA-targeted prostate cancer therapy.