In order to exert its antitumor effects, the C-nucleoside tiazofurin (2-beta-D-ribofuranosylthiazole-4-carboxamide) is converted to the dinucleotide TAD (thiazole-4-carboxamide adenine dinucleotide), an inhibitor of IMP dehydrogenase (IMPD). With few exceptions, sensitive tumors (such as the P388 leukemia) have been found to accumulate substantially more of this inhibitory dinucleotide than resistant strains (exemplified by the colon 38 carcinoma). Previous studies have attributed this difference to a depressed capacity to synthesize TAD on the part of tumors refractory to tiazofurin. In the present study, a second contributory factor has been identified, viz. an enhanced ability to degrade preformed TAD. This degradation has been traced to a soluble phosphodiesterase present at high levels in tumors naturally resistant to tiazofurin. Using standard techniques, this TAD-phosphodiesterase has been purified 200-fold from the colon 38 carcinoma. The activity so purified readily hydrolyzed TAD and ADP-ribose, but exhibited a comparatively weak activity toward NAD and thymidine-5'-monophosphate-nitrophenyl ester. ADP-Ribose was also an excellent inhibitor of the hydrolysis of TAD. It is concluded, on the basis of these results, that TAD-phosphodiesterase plays an important role in the expression of the oncolytic activity of tiazofurin. The suggestion is also made that ADP-ribose may be the natural substrate for this enzyme.