Pathogenic influenza virus infection often causes robust host cytokine responses, known as a cytokine storm, but the current antiviral therapy cannot modulate this harmful symptom. Dexamethasone is applied typically as an anti-inflammatory drug with minimal therapeutic effects and many side effects in this case. In this study, we aimed to deliver dexamethasone into macrophages which are major contributors to the cytokine storm. For effective application of drugs, we encapsulated dexamethasone into liposome with diameter of 1 μm for specific targeting of alveolar macrophages and administrated in H1N1 Influenza A/Wisconsin/WSLH34939/09 virus infection model. Therapeutic liposomal dexamethasone delivery enhanced mouse survival rates to 40% compared to 0 % in virus infected control mice. We further confirmed that liposomal dexamethasone significantly reduced TNFα, IL-1β, IL-6, MIP2 and IFNγ concentrations in bronchoalveolar lavage fluid from virus infected mice, while free dexamethasone could not. Lung histopathology showed severe bronchiolitis and alveolitis in virus infected control mice as well as free dexamethasone applied mice, while liposomal dexamethasone alleviated lung inflammation. In conclusion, liposome encapsulation of dexamethasone effectively reduced macrophage mediated lung inflammation in influenza infection model. We suggest that liposomes as effective drug delivery vehicles to target macrophages in influenza infection mediated cytokine storm.