AD 198, a novel lipophilic N-alkyl derivative of adriamycin (ADR) and a potential anticancer agent for preclinical development, was studied for its effects on the activities of DNA and RNA polymerases in vitro and its ability to bind DNA. AD 198, which contains a benzyl substituent on the glycosidic amine, was found to interact with DNA through drug-DNA binding to an extent less than its parent compound ADR as shown by fluorescent emission spectra studies. It had a preferential inhibitory effect against RNA vs. DNA synthesis in vitro by RNA or DNA polymerases from both E. coli and chicken leukemia cells. Preincubation studies indicated that AD 198 may inhibit the activity of E. coli RNA polymerase through drug-template interaction and that of leukemic RNA polymerase, which uses single stranded DNA as template, through enzyme inactivation.