Diluted India ink was instilled into the nasal cavity of mice and the lungs of some animals were fixed with osmium tetroxide at various intervals after one instillation. The lungs of other animals were fixed after 4, 7, 9, 16, or 18 daily instillations. The India ink was found to be phagocytized almost exclusively by the free alveolar macrophages. A few particles are occasionally seen within thin portions of alveolar epithelium, within the "small" alveolar epithelial cells, or within occasional leukocytes in the lumina of alveoli. The particles are ingested by an invagination process of the plasma membrane resulting in the formation of intracellular vesicles and vacuoles. Ultimately large amounts of India ink accumulate in the cell, occupying substantial portions of the cytoplasm. The surfaces of phagocytizing macrophages show signs of intense motility. Their cytoplasm contains numerous particles, resembling Palade particles, and a large amount of rough surfaced endoplasmic reticulum. These structures are interpreted as indicative of protein synthesis. At the level of resolution achieved in this study the membranes of this reticulum appear as single dense "lines." On the other hand, the plasma membrane and the limiting membranes of vesicles and of vacuoles often exhibit the double-line structure typical of unit membranes (Robertson, 37). The inclusion bodies appear to be the product of phagocytosis. It is believed that some of them derive from the vacuoles mentioned above, and that they correspond to similar structures seen in phase contrast cinemicrographs of culture cells. Their matrix represents phagocytized material. Certain structures within this matrix are considered as secondary and some of these structures possess an ordered form probably indicative of the presence of lipid. The possible origin and the fate of alveolar macrophages are briefly discussed.