Liquid aerosol formulations for generating aerosolized insulin include insulin and at least one high volatility carrier which protects the insulin from thermal degradation during vaporization of the carrier. The carrier can be a mixture of ethanol and water and the liquid aerosol formulation can be propellant free. An aerosol generating device generates the aerosolized insulin by passing the liquid aerosol formulation through a flow passage heated to convert the liquid into a vapor which entrains insulin particles which mix with air to form an aerosol. The insulin particles can be dry insulin particles produced by a hand held inhaler. By controlling the concentration of the insulin in the formulation, the size of the flow passage and/or the amount of heat which heats the flow passage, the aerosol can be provided with a selected mass median aerodynamic diameter of 1 to 3 .mu.m or less than 1 .mu.m so as to be delivered to a targeted portion of the lung using the inhaler.