In the last few years, marked progress has been made in the development of methods for evaluating the mutagenic and carcinogenic potential of pesticide chemicals. The correlation of genetic and related biological activity in short-term tests with carcinogenic activity in whole animals allows the utilization of short-term mutagenicity bioassays to prescreen chemicals for effects related to mutation induction and presumptive carcinogenicity. In addition, bioassays now available can measure directly the chemical transformation of normal cells in culture into cells capable of producing tumors when injected into animals. This paper will review briefly the major types of relevant short-term tests and will develop a rationale for a phased approach to the evaluation of the mutagenic and carcinogenic potential of environmental chemicals. This approach involves the sequential application of bioassays which are organized into a three-level matrix emphasizing first detection, then confirmation, and finally hazard assessment. Chemicals demonstrating positive results in the short-term detection systems and confirmatory bioassays are pursued in higher level whole animal define a negative result. The phased approach should facilitate a cost effective utilization of limited testing resources and provide protection for human health in proportion to the anticipated hazard. Results obtained in evaluating a series of thirty-eight pesticide chemicals according to the phased approach discussed in detail.