Bladder cancer is one of the few cancers that have been linked to carcinogens in the environment and tobacco smoke. Of the carcinogens tested in mouse chemical carcinogenesis models, N-butyl-N-(4-hydroxybutyl)nitrosamine (BBN) is one that reproducibly causes high-grade, invasive cancers in the urinary bladder, but not in any other tissues. However, the basis for such a high-level tissue-specificity has not been explored. Using mutagenesis in lacI (Big Blue™) mice, we show here that BBN is a potent mutagen and it causes high-level of mutagenesis specifically in the epithelial cells (urothelial) of the urinary bladder. After a 2-6-week treatment of 0.05% BBN in the drinking water, mutagenesis in urothelial cells of male and female mice was about two orders of magnitude greater than the spontaneous mutation background. In contrast, mutagenesis in smooth muscle cells of the urinary bladder was about five times lower than in urothelial tissue. No appreciable increase in mutagenesis was observed in kidney, ureter, liver or forestomach. In lacI (Big Blue™) rats, BBN mutagenesis was also elevated in urothelial cells, albeit not nearly as profoundly as in mice. This provides a potential explanation as to why rats are less prone than mice to the formation of aggressive form of bladder cancer induced by BBN. Our results suggest that the propensity to BBN-triggered mutagenesis of urothelial cells underlies its heightened susceptibility to this carcinogen and that mutagenesis induced by BBN represents a novel model for initiation of bladder carcinogenesis.