We have recently developed an alkaline elution/rat hepatocyte assay to sensitively measure DNA single-strand breaks induced by xenobiotics in non-radiolabeled rat hepatocytes. Here we have evaluated this assay as a predictor of carcinogenic/mutagenic activity by testing 91 compounds (64 carcinogens and 27 non-carcinogens) from more than 25 diverse chemical classes. Hepatocytes were isolated from uninduced rats by collagenase perfusion, exposed to chemicals for 3 h, harvested, and analyzed for DNA single-strand breaks by alkaline elution. DNA determinations were done fluorimetrically. Cytotoxicity was estimated by glutamate-oxaloacetate transaminase release or by trypan blue dye exclusion. The assay correctly predicted the reported carcinogenic/non-carcinogenic potential of 92% of the carcinogens tested and 85% of non-carcinogens tested. The assay detected a number of compounds, including inorganics, certain pesticides, and steroids, which give false-negative results in other short-term tests. Only 2 rat liver carcinogens were incorrectly identified; the other carcinogens incorrectly identified are weakly or questionably carcinogenic (i.e., they cause tumors only in one species, after lifetime exposure, or at high doses). Some chemicals cause DNA damage only at cytotoxic concentrations; of 16 such compounds in this study, 12 are weak carcinogens suggesting a link between DNA damage caused by cytotoxicity and carcinogenesis. Our data indicate that this assay rapidly, reproducibly, sensitively, and accurately detects DNA single-strand breaks in rat hepatocytes and that the production of these breaks correlates well with carcinogenic and mutagenic activity.