Cyclophosphamide, an extensively used cancer chemotherapeutic agent, requires metabolic activation through a mixed-function oxygenase system. The capacity of this agent to produce oncogenic transformation and chromosomal damage, including increases in sister chromatid exchanges, was investigated in cell culture with or without an exogenous liver metabolic activation system. No oncogenic transformation or chromosomal aberrations were produced by cyclophosphamide in the absence of metabolic activation, whereas significant transformation, chromosomal breaks, and increases in sister chromatid exchanges were observed when the activation system was incorporated into the assays. The oncogenic transformation and chromosomal changes were completely eliminated by removing glucose 6-phosphate and nicotinamide adenine dinucleotide phosphate from the metabolic generating system. These studies emphasize the necessity to incorporate some activation procedure into short-term assays used for evaluating the mutagenic and/or oncogenic potential of various chemicals.