Cerebral malaria is the most severe complication of Plasmodium falciparum infection, and a leading cause of death in children under the age of five in malaria-endemic areas. We report high therapeutic efficacy of a novel formulation of liposome-encapsulated water-soluble glucocorticoid prodrugs, and in particular β-methasone hemisuccinate (BMS), for treatment of experimental cerebral malaria (ECM), using the murine P. berghei ANKA model. BMS is a novel derivative of the potent steroid β-methasone, and was specially synthesized to enable remote loading into nano-sterically stabilized liposomes (nSSL), to form nSSL-BMS. The novel nano-drug, composed of nSSL remote loaded with BMS, dramatically improves drug efficacy and abolishes the high toxicity seen upon administration of free BMS. nSSL-BMS reduces ECM rates in a dose-dependent manner and creates a survival time-window, enabling administration of an antiplasmodial drug, such as artemisone. Administration of artemisone after treatment with the nSSL-BMS results in complete cure. Treatment with BMS leads to lower levels of cerebral inflammation, demonstrated by changes in cytokines, chemokines, and cell markers, as well as diminished hemorrhage and edema, correlating with reduced clinical score. Administration of the liposomal formulation results in accumulation of BMS in the brains of sick mice but not of healthy mice. This steroidal nano-drug effectively eliminates the adverse effects of the cerebral syndrome even when the treatment is started at late stages of disease, in which disruption of the blood-brain barrier has occurred and mice show clear signs of neurological impairment. Overall, sequential treatment with nSSL-BMS and artemisone may be an efficacious and well-tolerated therapy for prevention of CM, elimination of parasites, and prevention of long-term cognitive damage.