The metabolism of two of benzene's phenolic metabolites, phenol and hydroquinone, by peroxidase enzymes has been studied in detail. Studies employing horseradish peroxidase and human myeloperoxidase have shown that in the presence of hydrogen peroxide phenol is converted to 4,4'-diphenoquinone and other covalent binding metabolites, whereas hydroquinone is converted solely to 1,4-benzoquinone. Surprisingly, phenol stimulates the latter conversion rather than inhibiting it, an effect that may play a role in the in vivo myelotoxicity of benzene. Indeed, repeated coadministration of phenol and hydroquinone to B6C3F1 mice results in a dramatic and significant decrease in bone marrow cellularity similar to that observed following benzene exposure. A mechanism of benzene-induced myelotoxicity is therefore proposed in which the accumulation and interaction of phenol and hydroquinone in the bone marrow and the peroxidase-dependent formation of 1,4-benzoquinone are important components. This mechanism may also be responsible, at least in part, for benzene's genotoxic effects, as 1,4-benzoquinone has been shown to damage DNA and is shown here to induce multiple micronuclei in human lymphocytes. Secondary activation of benzene's phenol metabolites in the bone marrow may therefore play an important role in benzene's myelotoxic and carcinogenic effects.