Aflatoxin B-1, a potently carcinogenic fungal metabolite, is converted to the biologically active form by chemical oxidation using dimethyldioxirane and enzymatically by cytochrome P450 mixed-function oxidases. Both processes give rise to mixtures of the exo- and endo-8,9-epoxides. Methanolysis studies reveal exclusive trans opening of both epoxides under neutral conditions in CH3OH and CH3OH/H2O mixtures; an S(N)2 mechanism is postulated. Under acidic conditions, the exo isomer gives mixtures of trans and cis solvolysis products, suggesting that the reaction is, at least in part, S(N)1; the endo isomer gives only the trans product. The exo isomer reacts with DNA by attack of the nitrogen atom at the 7 position of guanine on C8 of the epoxide to give the trans adduct; the endo epoxide fails to form an adduct at this or any other site in DNA. The exo isomer is strongly mutagenic in a base-pair reversion assay employing Salmonella typhimurium; the endo isomer is essentially nonmutagenic. Aflatoxin B-1 and its derivatives intercalate in DNA. These results are consistent with a mechanism in which intercalation of the exo epoxide optimally orients the epoxide for an S(N)2 reaction with guanine but intercalation of the endo isomer places the epoxide in an orientation which precludes reaction. Thus, while the exo epoxide is a potent mutagen, the endo epoxide fails to react with DNA.