An almost universal side effect of long-term therapy with procainamide is the appearance of serum autoantibodies and less frequently a syndrome resembling lupus erythematosus. Previous studies demonstrated that procainamide-hydroxylamine (PAHA), a metabolite generated by hepatic mixed function oxidases, was highly toxic to dividing cells, but evidence that PAHA could be formed in the circulation was lacking. This study examines the capacity of neutrophils to metabolize procainamide to reactive forms. Neutrophils activated with opsonized zymosan were cytotoxic only if procainamide was present, whereas N-acetyl procainamide, which does not induce autoimmunity, was inert in this bioassay. PAHA was detected by HPLC in the extracellular medium if ascorbic acid was present. Generation of PAHA and cytotoxic procainamide metabolites was inhibited by NaN3 and catalase but not by superoxide dismutase, indicating that H2O2 and myeloperoxidase were involved. Nonactivated neutrophils and neutrophils from patients with chronic granulomatous disease did not generate cytotoxic PAHA, demonstrating that H2O2 was derived from the respiratory burst accompanying neutrophil activation. These conclusions were supported by results of a cell-free system in which neutrophils were replaced by myeloperoxidase and H2O2 or an H2O2 generating system. These studies demonstrate the capacity of neutrophils to mediate metabolism of procainamide and establish the role of myeloperoxidase released during degranulation and H2O2 derived from the respiratory burst in the direct cooxidation of procainamide to PAHA. The profound biologic activity of this metabolite and its possible generation within lymphoid compartments implicate this process in the induction of autoimmunity by procainamide.