Cyclophosphamide must be metabolized to have either therapeutic or toxic effects; many of the major metabolites of cyclophosphamide interact with thiol compounds. To characterize the relationship between the teratogenic and mutagenic metabolites of cyclophosphamide, the effect of thiol compounds on the teratogenicity and mutagenicity of this drug was studied. The effect on teratogenicity was assessed in vivo by treatment of rats with thiol compounds or thiol‐depleting agents prior to administration to cyclophosphamide on day 13 of gestation. The effect on mutagenicity was measured in vitro with a bacterial mutagenicity test using Salmonella typhimurium TA 1535. The administration of thiol compounds (glutathione or cysteine) decreased the teratogenicity of cyclophosphamide, whereas the administration of a thiol‐depleting agent (diethyl maleate) increased its teratogenicity. Low concentrations of glutathione (0.1–1.0 mM) increased the mutagenicity of cyclophosphamide; this effect was not observed with S‐methylglutathione or other thiol compounds. Higher concentrations of glutathione (10 mM, reduced or oxidized) and cystine, but not cysteine, decreased the mutagenicity of cyclophosphamide. Reduced dithiothreitol also decreased the mutagenicity of cyclophosphamide but was toxic in experiments in vivo so its effect on teratogenicity could not be evaluated. Thus, thiol compounds modify both the teratogenic and mutagenic effects of cyclophosphamide. Low concentrations of glutathione (the addition of glutathione in mutagenicity experiments or the depletion of endogenous glutathione in teratogenicity experiments) increased both the mutagenicity and the teratogenicity of cyclophosphamide, whereas high concentrations of this or other thiol compounds decreased these toxic effects. It may be possible to exploit the protective effect of thiol compounds clinically by using thiols to protect pregnant women from the teratogenic effects of inadvertent or intentional administration of cyclophosphamide.