Palytoxin (PTX), one of the most toxic nonprotein molecules known, is cytotoxic at picomolar concentrations against a wide variety of cell types. In contrast to most cytotoxins, PTX exerts its activity extracellularly. A method for targeting PTX to tumor cells is described in which a monoclonal antibody-enzyme conjugate activates a PTX prodrug at surfaces of tumor cells. The prodrug, N-(4'-hydroxyphenylacetyl)palytoxin (NHPAP), was prepared by reacting PTX with an active ester of 4-hydroxyphenylacetic acid. NHPAP was 1000 times less toxic than PTX to a panel of carcinoma and lymphoma cell lines. The cytotoxic activity of the combination of penicillin G amidase from Escherichia coli with NHPAP was equal to PTX. Two cell lines that were multidrug resistant showed no enhanced resistance to NHPAP +/- penicillin G amidase. Immunologically specific activation of NHPAP took place when H2981 cells (L6 antigen positive) were treated with the monoclonal antibody conjugate L6-penicillin G amidase followed by NHPAP. This system is distinguished from other prodrug activation schemes, since the released drug exerts its activity extracellularly, has high potency, and may be able to overcome the multidrug resistant phenotype.