Infiltrating T cells are found in many malignancies, but they appear to be mostly anergic and do not attack the tumor, presumably because of the absence of activation and/or costimulatory signals. We describe a strategy for cellular antitumor immunotherapy by the in situ production of soluble bifunctional Ab-based molecules that activate and retarget T cells to the tumor. We genetically modified cells to simultaneously secrete two bifunctional molecules, a bispecific diabody directed against the carcinoembryonic Ag (CEA) and the CD3 epsilon chain of the TCR (alphaCEA x alphaCD3), and a fusion protein comprising the extracellular portion of B7-1 fused to a bivalent anti-CEA diabody (B7-alphaCEA). Together, alphaCEA x alphaCD3 and B7-alphaCEA proved potent at inducing the activation, proliferation, and survival of primary human T cells. When producer cells were cocultured with primary T cells and CEA(+) cancer cells, alphaCEA x alphaCD3 and B7-alphaCEA acted in combination to activate and retarget T cell cytotoxicity and completely abrogate tumor growth in the coculture. Furthermore, the introduction of just a few such producer cells at the tumor site efficiently inhibited the growth of established human colon carcinoma xenografts. Despite a cumbersome generation process, the use of autologous gene-modified producer cells opens the way for a new diabody-based gene therapy strategy of cancer.