Hb-vesicles (HbV) are artificial O2 carriers encapsulating concentrated Hb solution (35 g/dL) with a phospholipid bilayer membrane (liposome). The concentration of the HbV suspension is extremely high ([Hb] = 10 g/dL) and it has an O2 carrying capacity that is comparable to that of blood. HbV is much smaller than RBC (250 vs. 8000 nm), but it recreates the functions of RBCs; (i) the slower rate of O2 unloading than Hb solution; (ii) colloid osmotic pressure is zero; (iii) the viscosity of a HbV suspension is adjustable to that of blood; (iv) HbV is finally captured by and degraded in RES; (v) co-encapsulation of an allosteric effector to regulate O2 affinity; (vi) the lipid bilayer membrane prevents direct contact of Hb and vasculature; (vii) NO-binding is retarded to some extent by an intracellular diffusion barrier, and HbV does not induce vasoconstriction. (viii) Both RBC and HbV can be a carrier of not only O2 but also exogenous CO. However, HbV has limitations such as a shorter functional half-life when compared with RBCs. On the other hand, the advantages of HbV are that it is pathogen-free and blood-type-antigen-free; moreover, it can withstand long-term storage of a few years, none of which can be achieved by the RBC transfusion systems.