Daunomycin (D1) was quantitatively converted to a metabolite, D2 (> 98% conversion), by an aerobic, cell-free system containing nicotinamide adenine dinucleotide phosphate, reduced form (NADPH) and the 100,000 x g supernatant fluid of rat kidneys. Under lowered oxygen concentrations, cell homogenates plus NADPH converted D, quantitatively to an unknown metabolite, D(x), with D2 as a possible intermediate. The chromatographic properties of D(x) differed from those of D2 and the aglycones of D1 and D2 (D4 and D3 respectively). Sufficient quantities of D2 and D(x) were prepared using NADPH-supplemented cell-free preparations from the kidneys of rats to assay their chemotherapeutic activity in vivo. The metabolite D2 was as effective as daunomycin (D1) against P388 leukemic cells growing in mice, but only one sixth as active against L1210 leukemic cells growing in suspension culture. The metabolite D(x) was much less active than either D2 or D1 when assayed against L1210 cells growing in culture and was inactive against P388 cells growing in mice.