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Nanobodies are the smallest fragments of naturally occurring single-domain antibodies that have evolved to be fully functional in the absence of a light chain. Nanobodies are strictly monomeric, very stable, and highly soluble entities. We identified a nanobody with subnanomolar affinity for the human tumor-associated carcinoembryonic antigen. This nanobody was conjugated to Enterobacter cloacae β-lactamase, and its site-selective anticancer prodrug activation capacity was evaluated. The conjugate was readily purified in high yields without aggregation or loss of functionality of the constituents. In vitro experiments showed that the nanobody–enzyme conjugate effectively activated the release of phenylenediamine mustard from the cephalosporin nitrogen mustard prodrug 7-(4-carboxybutanamido) cephalosporin mustard at the surface of carcinoembryonic antigen-expressing LS174T cancer cells. In vivo studies demonstrated that the conjugate had an excellent biodistribution profile and induced regressions and cures of established tumor xenografts. The easy generation and manufacturing yield of nanobody-based conjugates together with their potent antitumor activity make nanobodies promising vehicles for new generation cancer therapeutics.