Cyclophosphamide is an extensively used anticancer and immunosuppressive agent. It is a prodrug undergoing a complicated process of metabolic activation and inactivation. Technical difficulties in the accurate determination of the cyclophosphamide metabolites have long hampered the assessment of the clinical pharmacology of this drug. As these techniques are becoming increasingly available, adequate description of the pharmacokinetics of cyclophosphamide and its metabolites has become possible. There is incomplete understanding on the role of cyclophosphamide metabolites in the efficacy and toxicity of cyclophosphamide therapy. However, relationships between toxicity (cardiotoxicity, veno-occlusive disease) and exposure to cyclophosphamide and its metabolites have been established. Variations in the balance between metabolic activation and inactivation of cyclophosphamide owing to autoinduction, dose escalation, drug-drug interactions and individual differences have been reported, suggesting possibilities for optimisation of cyclophosphamide therapy. Knowledge of the pharmacokinetics of cyclophosphamide, and possibly monitoring the pharmacokinetics of cyclophosphamide in individuals, may be useful for improving its therapeutic index.