Osteogenic tissue formed in vivo in diffusion chambers inoculated with a suspension of marrow cells contains both bone and cartilage. Observations by transmission electron microscopy on the transitional zone between these tissues showed a mixture of osseous and cartilaginous features in both matrix and cells. Two forms of collagen, morphologically consistent with Types I and II, are found in intimate association within the same intercellular septa. The results suggest the possibility that the different collagen types are synthesized by the same cells and that the variation in cellular morphology could be associated with the changes in the type of collagen synthesized. This unique characteristic of calcified tissues formed in diffusion chambers is probably the result of isolation from direct blood circulation, mechanical stress, and cellular mechanisms of tissue breakdown.