Dioleoyl phosphatidylcholine (PC) liposomes were ozonized and the ozonized liposomes were tested for their lytic potency on human red blood cells (RBC). Ozonation of PC liposomes generated approximately 1 mole equivalent of hydrogen peroxide (H2O2) and 2 mole equivalents of aldehydes, based on the moles of ozone consumed. The time necessary for 50% hemolysis induced by ozonized liposomes (a convenient measure of hemolytic activity) was found to depend on the extent of ozonation of the PC liposomes, indicating the formation and accumulation of hemolytic agents during ozonation. Hemolysis was also observed when RBC were incubated with nonanal, the expected product of the ozonation of oleic acid, the principle unsaturated fatty acid in the liposomes. Hydrogen peroxide, another product of PC ozonation, did not induce hemolysis; however, a combination of H2O2 and nonanal was significantly more hemolytic than nonanal alone. A ratio of 1:2 H2O2/nonanal (the ratio observed in the ozonized liposomes) provided hemolytic activity comparable to that observed with ozonized dioleoyl PC. Among different antioxidants tested, ascorbate, catalase, and glutathione peroxidase partially inhibited hemolysis induced by ozonized liposomes and by H2O2/nonanal mixtures, but they were not protective against the nonanal-induced hemolysis. Identification of H2O2 and aldehydes as cytotoxic chemical species generated from the ozonation of unsaturated fatty acids may have an important bearing on the in vivo toxicity of ozone on the lung as well as on extrapulmonary tissues.