Nasal olfactory tumours occur in cattle in relatively high frequencies in several developing countries. Since affected animals sometimes show signs of severe aflatoxicosis, a role of aflatoxin B1 (AFB1) in tumorigenesis can be proposed. The results of the present study show that microsomal preparations of the bovine olfactory mucosa have a much higher ability than liver microsomes to induce covalent binding of AFB1 to calf thymus DNA and to microsomal proteins. The major DNA adduct formed was 8,9-dihydro-8-(N7-guanyl)-9-hydroxy-aflatoxin B1. Incubations of microsomal preparations of the bovine nasal olfactory mucosa with glutathione (GSH) and cytosolic fractions of the nasal mucosa resulted in decreased AFB1 DNA binding. A more pronounced decrease was observed when cytosolic fractions of mouse liver were added to the incubations. Mouse liver is known to contain a glutathione-S-transferase with a high ability to scavenge the reactive AFB1-epoxide via conjugation to GSH. Our results indicate that AFB1-GSH conjugation occurs less efficiently in the bovine nasal olfactory mucosa than in the mouse liver. Supernatant preparations (9000 g) of the bovine nasal olfactory mucosa incubated with AFB1 were shown to have the capacity to induce a strong genotoxic response both as regards induction of gene mutations in Salmonella typhimurium TA100 and the induction of sister chromatid exchanges in Chinese hamster ovary cells. Preparations of the bovine liver (9000 g) has a much lower ability to induce these effects. The results of the present study show that the bovine nasal olfactory mucosa has a high AFB1-bioactivating capacity, which can be related to the potent DNA damaging and mutagenic effects observed. It is considered that our results support the assumption that AFB1 plays a role in the aetiology of nasal tumours in cattle.