Using the coupled microsomal activating/embryo culture system, in vitro experiments were performed to establish the role of metabolism in the embryo toxicity and teratogenicity of cyclophosphamide. Cyclophosphamide in the coupled microsomal activating/embryo culture system produced characteristic morphological lesions as well as a general inhibition of embryo and yolk sac growth. Increasing concentrations of microsomes and cyclophosphamide produced progressively greater response. These effects did not occur when microsomes and NADPH were present in the serum medium for the first 2 hours of incubation followed by one washing and then culturing of the conceptuses from hr 2 to hr 48 in a medium containing cyclophosphamide alone. Cytochrome P-450-depleted microsomes did not bioactivate cyclophosphamide to teratogenic or toxic metabolites. The results indicate that cytochrome P-450-dependent microsomal metabolism of cyclophosphamide is required for the embryotoxic and teratogenic effects observed in vitro.