IN PHYSODERMA PULPOSUM sexuality is expressed by isogametes, derived from different epibiotic sporangia, which fuse in pairs and give rise to zygotes (Lingappa, 1958). The present contribution concerns the development of zygotes in the host tissues. In 1940, Sparrow suggested that in Physoderma planospores from epibiotic sporangia might function as gametes and fuse and that the resulting zygotes might initiate the endobiotic resting sporangial phase. In spite of numerous studies of several species of Physoderma (d. Karling, 1950), the origin of the endobiotic phase was not precisely known in any species, and Sparrow's hypothesis was not experimentally proved. This was due to lack of evidence from controlled infection experiments using proper inocula. Previous studies in Physoderma were based entirely on infected host plants collected from the field. Such materials are unsuitable for determinative studies because the origin and sequence of developmental stages of infection cannot be traced with certainty in such material. Therefore, the following observations are based on studies of living as well as fixed and stained materials which were obtained, at desired intervals, after inoculation and infection of host plants in the greenhouse. MATERIAL AND METHODS.-This study was made DEVELOPMENT AND CYTOLOGY OF THE ENDOBIOTIC PHASE OF