Exposure to ambient particulate matter has been reported to be associated with increased rates of lung cancer. Previously we showed that total suspended particulate matter (PM) induces oxidative DNA damage in epithelial lung cells. The aim of the present study was to further investigate the mechanism of PM-induced DNA damage, in which soluble iron-mediated hydroxyl radical (.OH) formation is thought to play a crucial role. Using electron spin resonance (ESR) we showed that PM suspensions as well as their particle-free, water-soluble fractions can generate .OH in the presence of hydrogen peroxide (H2O2), an effect which was abrogated by both deferoxamine and catalase. In addition, PM was also found to induce the .OH-specific DNA lesion 8-hydroxydeoxyguanosine (8-OHdG) in the presence of H2O2 as assessed by dot-blot analysis of calf thymus DNA using an 8-OHdG antibody. In human alveolar epithelial cells (A549), both PM suspensions and the particle-free soluble fraction elicited formation of DNA strand breaks (comet-assay). Unlike the acellular DNA assay, in epithelial cells the DNA-damaging capacity of the particle suspensions appeared to be stronger than that of their corresponding particle-free filtrates. In conclusion, our findings demonstrate that the water-soluble fraction of PM elicits DNA damage via transition metal-dependent .OH formation, implicating an important role of H2O2. Moreover, our data indicate that direct 'particle' effects contribute to the genotoxic hazard of ambient particulate matter in lung target cells.