A novel “smart” multifunctional drug delivery system was successfully developed to respond to the up-regulated matrix metalloprotease 2 (MMP2) in the tumor microenvironment and improve cancer cell-specific delivery of loaded drugs. The system represents a surface-functionalized liposomal nanocarrier, for which two functional polyethylene glycol (PEG)-lipid conjugates were synthesized and characterized. The functionalized liposome was further modified with the tumor cell-specific anti-nucleosome monoclonal antibody (mAb 2C5). In the resulting system, several drug delivery strategies were combined in the same nanocarrier in a simple way and coordinated in an optimal fashion. The functions of the nanocarrier include: i) the hydrophilic and flexible long PEG chains to prevent nanocarrier non-specific interactions and prolong its circulation time; ii) a nanoscale size of the system that allows for its passive tumor targeting via the enhanced permeability and retention (EPR) effect; iii) a mAb 2C5 to allow for the specific targeting of tumor cells; iv) a matrix metalloprotease 2-sensitive bond between PEG and lipid that undergoes cleavage in the tumor by the highly expressed extracellular MMP2 for the removal of PEG chains; v) The cell-penetrating peptide (TATp) triggering of the enhanced intracellular delivery of the system after long-chain PEG removal and exposure of the previously hidden surface-attached TATp. It is shown that such a design can enhance the targetability and internalization of nanocarriers in cancer cells.