The ultrastructure of inner capsule cells of the vertebrate muscle spindle was studied by transmission electron microscopy and compared with that of homologous cells in the tendon organ. Aside from variations in their complexity and pattern of organization, cells of the inner capsule in these two sensory receptors exhibited marked similarities in fine structure. The virtual absence of basal lamina in the region of the nucleated soma as well as on the branching cytoplasmic extensions of these cells was noted. In the inner capsule of both end organs, three kinds of intercellular specialization were encountered. Cell processes were typically linked together at multiple sites by intermediate junctions. In addition, focal points of membrane fusion between two or more cellular profiles were identified as tight junctions. In more extensive regions of plasma membrane overlap, gap junctions were also discerned. It seems probable that these sites along the inner capsule represent areas of mechanical and electrical linkage, enabling contiguous cells to function as a synchronous unit. Tight junctions may also provide the inner capsular sheath with specific permeability-barrier characteristics. Elements of the Golgi complex and associated presecretory vesicles and cytoplasmic granules were prominent. Their presence implicates these cells in the elaboration of the paracellular connective-tissue matrix occupying the intracapsular spaces of both receptors. The close resemblance of these cells to endoneurial fibroblasts of peripheral nerve and to hyalocytes of the vitreous body is emphasized. It is likely that, regardless of species examined, cells of the inner capsule in both receptors play an overall protective role in the formation, maintenance and regulation of their luminal paracellular contents.