The mechanism of action of danazol is poorly understood, but this testosterone (T) derivate is frequently used in the clinical treatment of endometriosis, and its tendency to androgenic/anabolic side effects is well known. The interaction of danazol with T binding to sex-hormone-binding globulin (SHBG) was studied with the use of an aqueous two-phase system with polyethylene glycol (PEG) and dextran for equilibrium partition. Competitive binding studies were also performed with norethisterone (NET), d-norgestrel (d-Ng), medroxyprogesterone acetate (MPA), and tamoxifen (TMX). Danazol, d-Ng, and NET were found to exert a marked T displacing activity, while MPA and TMX had no significant effect. The low values for SHBG binding capacity that were found during danazol therapy mainly reflect occupation of binding sites by danazol and to a lesser degree a real decrease in protein concentration. It was calculated that during treatment the total SHBG capacity in serum is approximately 20 times exceeded. Therapeutic danazol serum levels are 1000 times those of normal female total T levels; and since the affinity to SHBG for danazol was found to be 1/20 that to T one should conclude an almost total occupation of binding sites. The endocrine effects of danazol might be interpreted in terms of T displacement and as a consequence of increased levels of free T during therapy.