Cells from 4-day chicken embryo limb buds plated as micromass cultures differentiate and form cartilage nodules after a 5- to 6-day growth period. The innate ability of these cells to biotransform compounds, such as cyclophosphamide (CP), into reactive metabolites is apparently inadequate. Protocols used rat liver S9 from Aroclor 1254-pretreated (PCB) rats or hepatocytes from control rats or polychlorinated biphenyls (PCB)-pretreated rats and were added to micromass cultures with CP causing concentration-related toxicity in the cell cultures. Coculturing chicken limb bud cells with PCB-hepatocytes was the most efficient method, yielding an IC50 of 2 micrograms CP per ml. Toxic CP metabolites accumulated in the medium of PCB-hepatocyte cultures and were quite stable. The toxicity of bioactivated CP was nearly identical for both proliferation and cartilage proteoglycan accumulation.