The drug delivery system to tumors is a critical factor in upregulating the effect of anticancer drugs and reducing adverse events. Recent studies indicated selective migration of bone marrow-derived endothelial progenitor cells (EPC) into tumor tissues. Cytosine deaminase (CD) transforms nontoxic 5-fluorocytosine (5-FC) into the highly toxic 5-fluorouracil (5-FU). We investigated the antitumor effect of a new CD/5-FC system with CD cDNA transfected EPC for hepatocellular carcinoma (HCC) in mice. We used human hepatoma cell lines (HuH-7, HLF, HAK1-B, KYN-2, KIM-1) and a rat EPC cell line (TR-BME-2). Escherichia coli CD cDNA was transfected into TR-BME-2 (CD-TR-BME). The inhibitory effect of 5-FU on the proliferation of hepatoma cell lines and the inhibitory effect of 5-FU secreted by CD-TR-BME and 5-FC on the proliferation of co-cultured hepatoma cells were evaluated by a tetrazolium-based assay. In mouse subcutaneous xenograft models of KYN-2 and HuH-7, CD-TR-BME was transplanted intravenously followed by 5-FC injection intraperitoneally. HuH-7 cells were the most sensitive to 5-FU and KYN-2 cells were the most resistant. CD-TR-BME secreted 5-FU and inhibited HuH-7 proliferation in a 5-FC dose-dependent manner. CD-TR-BME were recruited into the tumor tissues and some were incorporated into tumor vessels. Tumor growth of HuH-7 was significantly suppressed during 5-FC administration. No bodyweight loss, ALT abnormality or bone marrow suppression was observed. These findings suggest that our new CD/5-FC system with CD cDNA transfected EPC could be an effective and safe treatment for suppression of 5-FU-sensitive HCC growth. (Cancer Sci 2012; 103: 542–548)