The present invention relates to a liposomal lupeol acetate (Lipo-LA) and its use in the treatment or prevention of rheumatoid arthritis (RA). The liposomal lupeol acetate of the present invention especially inhibits inflammatory responses and osteoclast generation (osteoclastogenesis) in the progression of rheumatoid arthritis (RA) at a half dose of the un-capsulated lupeol acetate, which may significantly reduce the incidence of RA and improve the therapeutic efficacy of lupeol acetate.