Background: In view of the magnitude and severity of outbreaks of the highly pathogenic H5N1 influenza virus (H5N1‐HPIV) and the threat to public health, there is an urgent need to develop broad‐spectrum prophylactic and therapeutic agents against infection by H5N1‐HPIV and other subtypes. Methods and Results: In the present study, we explored the use of LE‐PolyICLC, a liposome encapsulated double‐stranded RNA, as a possible prophylactic, therapeutic and immune enhancement agent. In a mouse infection model, we showed that the administration of LE‐PolyICLC intranasally before or shortly after infection could inhibit virus replication, leading to a significant reduction in pulmonary viral titres and a higher survival rate of infected mice. When used as a molecular adjuvant, LE‐PolyICLC significantly enhanced both the humoral and cellular responses elicited by inactivated H5N1 vaccine and augmented the protective efficacy provided by vaccination. Most importantly, the data also demonstrate that LE‐PolyICLC could effectively attenuate the development of pulmonary fibrosis during the restoration period at day 14 after H5N1 infection. Conclusions: Taken together, the data obtained in the present study suggest that strong consideration should be given for the use of LE‐PolyICLC as prophylactic and therapeutic agents and also as a vaccination adjuvant to combat highly pathogenic influenza infection and its associated complications such as pulmonary fibrosis. Copyright © 2011 John Wiley & Sons, Ltd.