N-Benzyladriamycin-14-valerate (AD 198) is a highly lipophilic analogue of Adriamycin with novel cytotoxic mechanisms, greater in vivo antitumor activity, and the ability to circumvent multidrug resistance due to P-glycoprotein-mediated drug efflux or decreased topoisomerase II activity. To identify the mechanism(s) which may confer AD 198 resistance, J774.2 mouse macrophage-like cells were selected for growth in cytotoxic levels of AD 198 (AD 198R). AD 198R cells exhibited over-expression of the mdr1b (P-glycoprotein) gene, cross-resistance to Adriamycin and vinblastine, and potentiation of drug cytotoxicity by verapamil. However, net intracellular accumulation of AD 198 in AD 198R cells was unchanged compared to parental cells, while Adriamycin and vinblastine accumulations were reduced 40% and 95%, respectively. AD 198 was localized in the perinuclear region of the cytoplasm in both parental and AD 198R cells, with additional vesicular compartmentalization in AD 198R cells. Verapamil-induced reversal of AD 198 resistance coincided with some drug redistribution from cytoplasmic vesicles, but without redistribution of AD 198 into the nucleus. These results suggest that AD 198 resistance was not conferred through a P-glycoprotein-mediated reduction in intracellular drug accumulation but through other cytoplasmic mechanisms, including, but not limited to, drug compartmentalization.