Sclerotia were formed in both aerial and submerged parts of the mycelium. In addition a layer of cells with pigmented thick walls (called brown matting) which differentiated at the air/agar interface was interpreted as an aspect of sclerotial behaviour since it was regularly formed by strains which produced submerged sclerotia and was composed of cells of similar structure to those of the outermost layer of the submerged sclerotium. Apart from producing sclerotia and oidiospores the cells of the aerial mycelium remained undifferentiated. In contrast, cells of the submerged mycelium, though initially indistinguishable from those of aerial hyphae, became individually differentiated within about 5 days of growth producing two further novel cell types; inflated cells containing glycogen, and hyaline thick-walled cells. Submerged sclerotia were pale brown in colour, irregularly shaped and about 0.5–1.0 mm in diameter. The only structure which differentiated the submerged sclerotium from the submerged mycelium was the outer rind, a layer of cells with thick, pigmented walls. The central (medulla) region contained the same cell types in the same frequencies as the general submerged mycelium. In sharp contrast the aerial sclerotia were highly organized structures composed of distinct and compact tissues. Mature aerial sclerotia were dark brown to black spheroidal structures up to 0.5 mm in diameter. An outer layer of dead and moribund hyphae surrounded the main body of the sclerotium which was bilayered with an outer rind and inner medulla. The rind was multilayered and consisted of small cells with thick pigmented walls; intercellular spaces were cuticularized. The medulla was a closely packed tissue composed predominantly of hyaline thick-walled cells of the same type as were encountered in the submerged mycelium.