Diabodies are the recombinant bispecific antibodies (BsAbs), constructed from heterogeneous single-chain antibodies. Usually, diabodies have been prepared from bacterial periplasmic fraction using a co-expression vector (i.e. genes encoding two chains were tandemly located under the same promoter). Some diabodies, however, cannot be expressed as a soluble material owing to inclusion body formation, which limits the utilization of diabodies in various fields. Here we report an improved method for the construction of diabodies using a refolding system. As a model, a bispecific diabody binding to adenocarcinoma-associated antigen MUC1 and to CD3 on T cells was studied. One chain consisted of a VH specific for MUC1 linked to a VL specific for CD3 with a short polypeptide linker (GGGGS). The second was composed of a VL specific for MUC1 linked to a VH specific for CD3. The two hetero scFvs were independently obtained from intracellular insoluble fractions of Escherichia coli, purified, mixed stoichiometrically (at an equivalent molar ratio of 1:1) and refolded. The refolded two hetero scFv has a hetero-dimeric structure, with complete specificity for both target cells [i.e. MUC1 positive cells and CD3 positive lymphokine-activated killer cells with a T cell phenotype (T-LAK)]. Evaluation of the in vitro efficacy of T-LAK with the diabody by growth inhibition assay of cancer cells demonstrated maximum growth inhibition of cancer cells to reach approximately 98% at an effector:target ratio (E:T ratio) of 10, almost identical with that with anti-MUC1xanti-CD3 chemically synthesized BsAbs (c-BsAbs). This is the first report of the construction of a diabody using a refolding system.