The in vitro cytotoxicity and mechanism of action of cyclophosphamide (CP) were studied in a dual cell culture system, using rat hepatocytes and K562 human chronic myeloid leukemia cells. Cytotoxicity and DNA damage were measurable in K562 cells using CP concentrations that are clinically attainable. Alkaline elution analysis of cellular DNA demonstrated the presence of concentration- and time-dependent DNA interstrand cross-links, DNA-protein cross-links, and DNA single strand breaks in K562 cells following a 1-h exposure to cyclophosphamide activated by hepatocytes. Hepatocyte-activated CP was 3 to 4 times more potent than phosphoramide mustard with regard to cytotoxicity and induction of DNA interstrand cross-links. Exposure to phosphoramide mustard did not produce single strand breaks, but exposure of K562 cells to acrolein resulted in substantial levels of single strand breaks. The demonstration of acrolein-induced single strand breaks following exposure to activated CP is a novel finding and suggests that acrolein may have a role in the cytotoxicity of CP.