In the sheep conceptus, individual intraepithelial binucleate cells first appear at 14 days post-coitum (d.p.c.); and by 16 d.p.c. they form 15-20% of the trophectoderm where it is apposed to the caruncular sites of initial attachment to the uterine epithelium. These binucleate cells and their derivatives can be recognized in the placenta by electron microscopy after selective staining of their Golgi body and its products, the numerous characteristic granules. Between 16 and 24 d.p.c. the uterine epithelium transforms to syncytial plaques. Evidence from ultrastructure and serial semithin sections indicates that this transformation is initiated by migration of fetal binucleate cells up to the microvillar junction and their fusion with individual uterine epithelial cells, producing trinucleate fetomaternal hybrid cells. These cells then appear to release their granules to the endometrium. It is suggested that continued binucleate-cell migration and fusion with the trinucleate cells, together with displacement and/or death of the remaining uterine epithelial cells, produces the plaques of syncytium that cover the entire caruncle by 20-24 d.p.c. This caruncular syncytium, in which no nuclear division has been found, expands enormously in area during the formation and maintenance of the cotyledons, deriving its nuclei from binucleate migration.