Cyclophosphamide, an orally active alkylating agent, is widely used to treat a variety of malignant and nonmalignant disorders. Although it has some tumour selectivity, it also possesses a wide spectrum of toxicities. The requirement of metabolic activation before cyclophosphamide exerts either its therapeutic or toxic effects is well established, but has not led to effective counter-measures. Clinically, damage to the bladder (haemorrhagic cystitis), immunosuppression (when not desired) and alopecia are the most significant toxicities associated with cyclophosphamide. Cardiotoxicity is also a possibility when very high doses are given. Preventing these toxicities has focused on modifications of the treatment regimens and, in the case of haemorrhagic cystitis, the administration of a drug which is excreted in the urine where it inactivates the bladder-toxic species. As treatment regimens for cancer become more effective in prolonging a patient's life, and as cyclophosphamide receives increasing use for nonmalignant disorders, the potential for cyclophosphamide-induced cancers, particularly in the bladder, must be recognised. Although the toxicities associated with cyclophosphamide are serious, this agent remains a highly effective drug in many situations. Research on the pathways which play an important role in activating this drug may improve our ability to target particular diseases and decrease unwanted side effects.