We studied the effect of daunomycin, a cancer chemotherapeutic agent, on a model cellular system in which folded compact DNA was encapsulated inside a cell-sized phospholipid liposome. Real-time observation with fluorescence microscopy revealed that, upon the addition of daunomycin, entrapped DNA was first elongated and then cut into fragments. A blebbing transition of the membrane was also observed. A theoretical model is proposed to explain the blebbing phenomenon induced by daunomycin, taking into account its effect on the asymmetry between the outer and inner layers of the membrane. (C) 2002 Elsevier Science B.V. All rights reserved.