L-377,202 prodrug (Dox-PSA) was in phase I clinical trials for patients with metastatic castration-resistant prostate cancer (mCRPC). It consists of doxorubicin (Dox) conjugated to a prostate specific antigen (PSA)-cleavable peptide that can be selectively activated by secreted PSA at the tumor site. However, despite the initial promising results, further clinical testing with Dox-PSA was halted due to toxicity concerns emerging from non-PSA-specific cleavage, following systemic administration. In the present study, we have reported, for the first time, the intracellular activation of Dox-PSA, where Dox nuclear uptake was specific to C4-2B (PSA-expressing) cells, which agreed with the cytotoxicity studies. This finding was confirmed by encapsulating Dox-PSA prodrug into pH-sensitive liposomes to enable prodrug intracellular release, followed by its enzymatic activation. Interestingly, our results demonstrated that Dox-PSA loaded into pH-responsive nanoparticles exhibited cytotoxicity comparable to free prodrug in C4-2B monolayers, with superior activity in tumor spheroids, due to deeper penetration within tumor spheroids. Our approach could open the doors for novel Dox-PSA nanomedicines with higher safety and efficacy to treat advanced and metastatic prostate cancer.