Abstract Background Auger electron-emitting radionuclides have potential in targeted treatment of small tumors. Thallium-201 (201Tl), a gamma-emitting radionuclide used in myocardial perfusion scintigraphy, decays by electron capture, releasing around 37 Auger and Coster–Kronig electrons per decay. However, its therapeutic and toxic effects in cancer cells remain largely unexplored. Here, we assess 201Tl in vitro kinetics, radiotoxicity and potential for targeted molecular radionuclide therapy, and aim to test the hypothesis that 201Tl is radiotoxic only when internalized. Methods Breast cancer MDA-MB-231 and prostate cancer DU145 cells were incubated with 200–8000 kBq/mL [201Tl]TlCl. Potassium concentration varied between 0 and 25 mM to modulate cellular uptake of 201Tl. Cell uptake and efflux rates of 201Tl were measured by gamma counting. Clonogenic assays were used to assess cell survival after 90 min incubation with 201Tl. Nuclear DNA damage was measured with γH2AX fluorescence imaging. Controls included untreated cells and cells treated with decayed [201Tl]TlCl. Results 201Tl uptake in both cell lines reached equilibrium within 90 min and washed out exponentially (t1/2 15 min) after the radioactive medium was exchanged for fresh medium. Cellular uptake of 201Tl in DU145 cells ranged between 1.6 (25 mM potassium) and 25.9% (0 mM potassium). Colony formation by both cell lines decreased significantly as 201Tl activity in cells increased, whereas 201Tl excluded from cells by use of high potassium buffer caused no significant toxicity. Non-radioactive TlCl at comparable concentrations caused no toxicity. An estimated average 201Tl intracellular activity of 0.29 Bq/cell (DU145 cells) and 0.18 Bq/cell (MDA-MB-231 cells) during 90 min exposure time caused 90% reduction in clonogenicity. 201Tl at these levels caused on average 3.5–4.6 times more DNA damage per nucleus than control treatments. Conclusions 201Tl reduces clonogenic survival and increases nuclear DNA damage only when internalized. These findings justify further development and evaluation of 201Tl therapeutic radiopharmaceuticals.