Despite advances in vector technology, inefficient gene transfer still limits clinical efficacy of cancer gene therapy. Cell-penetrating peptides (CPPs), such as the basic domain of the transactivator of transcription (Tat) protein of HIV-1, are internalized by intact cells and have been used to deliver purified recombinant proteins. A combination of gene therapy with protein transduction technology could induce a strong bystander effect and represent a platform to deliver proteins to target cells. However, whether expressed CPP can facilitate intercellular trafficking, i.e., a bystander effect, is controversial. Our data suggest that expressed fusion proteins that contain the basic domain of Tat do not induce a detectable bystander effect. However, Tat-fusion proteins that also contain a secretory signal peptide (SP) can induce a bystander effect in vitro, although the in vivo effect is small. Surprisingly, despite the presence of a SP, the bystander effect does not seem to be related to secretion of the fusion protein. In fact, Tat-fusion proteins are secreted very inefficiently, and protein transduction seems largely mediated by fusion proteins that are released by cell lysis. Modification of Tat can improve secretion efficacy and prevent cleavage by the endoprotease furin, but passage through the secretory pathway is associated with reduced transduction activity of Tat-fusion proteins.