Orthonectids are enigmatic parasitic bilaterians whose exact position on the phylogenetic tree is still uncertain. Despite ongoing debate about their phylogenetic position, the parasitic stage of orthonectids known as “plasmodium” remains underexplored. There is still no consensus on the origin of the plasmodium: whether it is an altered host cell or a parasitic organism that develops in the host extracellular environment. To determine the origin of the orthonectid parasitic stage, we studied in detail the fine structure of the Intoshia linei orthonectid plasmodium using a variety of morphological methods. The orthonectid plasmodium is a shapeless multinucleated organism separated from host tissues by a double membrane envelope. Besides numerous nuclei, its cytoplasm contains organelles typical for other bilaterians, reproductive cells, and maturing sexual specimens. Reproductive cells, as well as developing orthonectid males and females, are covered by an additional membrane. The plasmodium forms protrusions directed to the surface of the host body and used by mature individuals for egress from the host. The obtained results indicate that the orthonectid plasmodium is an extracellular parasite. A possible mechanism for its formation might involve spreading parasitic larva cells across the host tissues with subsequent generation of a cell‐within‐cell complex. The cytoplasm of the plasmodium originates from the outer cell, which undergoes multiple nuclear divisions without cytokinesis, while the inner cell divides, giving rise to reproductive cells and embryos. The term “plasmodium” should be avoided and the term “orthonectid plasmodium” could be temporarily used instead.