The specificity of tumor therapy may be improved by preferentially activating antineoplastic prodrugs at tumor cells pretargeted with antibody-enzyme conjugates. In this study, the conditions required for the efficient activation of p-hydroxyaniline mustard glucuronide (BHAMG) to p-hydroxyaniline mustard (pHAM) were investigated. pHAM induced cross-links in linearized double-stranded DNA at about 180-fold lower concentrations than BHAMG, indicating that the nucleophilicity of pHAM was decreased by the presence of a glucuronide group. The partition coefficient of BHAMG was about 1890 times lower than pHAM in an octanol-water two-phase system, suggesting that the reduced toxicity of BHAMG was due to both hindered diffusion across the lipid bilayer of cells and decreased reaction with nuclear DNA. BHAMG was significantly less toxic to BHK cells that expressed cytosolic Escherichia coli-derived beta-glucuronidase (betaG) compared with cells that were engineered to secrete betaG, demonstrating that extracellular localization of betaG was required for optimal activation of BHAMG. The extended retention of mAb RH1 on the surface of AS-30D cells was also consistent with extracellular activation of BHAMG. Taken together, our results indicate that the low toxicity of BHAMG was due to hindered cellular uptake and low alkylating activity. BHAMG must be enzymatically activated outside of tumor cells for maximum cytotoxicity, and non-internalizing antibodies are preferred for human tumor therapy by targeted antibody-enzyme activation of BHAMG.