The human multidrug resistance P-glycoprotein is an active transporter that pumps cytotoxic drugs out of cells. Expression of P-glycoprotein is also associated with a volume-activated chloride channel. Here we address the relationship between these two functions. Drug transport requires ATP hydrolysis while, in contrast, ATP binding is sufficient to enable activation of the chloride channel. The chloride channel and drug transport activities of P-glycoprotein appear to reflect two distinct functional states of the protein that can be interconverted by changes in tonicity. Transportable drugs prevent channel activation but have no effect on channel activity once it has been preactivated by hypotonicity. The transport and channel functions of P-glycoprotein have been separated by directed mutations in the nucleotide-binding domains of the protein. These data provide further evidence that P-glycoprotein is bifunctional with both transport and channel activities. Implications for the design of chemotherapeutic drugs and for the function of the related cystic fibrosis gene product, CFTR, are discussed.