Tissues from 22 cases of nodular sclerosing Hodgkin's disease were studied by light and electron microscopy in conjunction with immunohistologic and cytochemical staining. The presence of lipid in the cytoplasm of lacunar cells suggested that this was responsible for the distinctive "lacunar" appearance of the cells. Marked morphologic similarities between "blast cells" resulting from mitogen stimulation of lymphocytes in vi-ro, immunoblasts seen in reactive lymphoid tissues, and mononuclear "Hodgkin's" cells in Hodgkin's disease suggested that all three cell types may result from lymphocyte transformation. It also seemed apparent that there was a developmental sequence from lymphocyte to transformed lymphocyte to the abnormal mononuclear Hodgkin's cell, with further progression, through increasing size and nuclear lobulation, to the lacunar cell or, alternatively, to the diagnostic Reed-Sternberg cell. This proposed sequence was supported by immunoperoxidase studies in which cytoplasmic immunoglobulin was demonstrated in mononuclear Hodgkin's cells, lacunar cells and Reed-Sternberg cells. The proposed relationship between these cells was also supported by the findings of both kappa and lambda chains in the same cells, a pattern not seen in reactive transformed lymphocytes.