Twenty-five examples of basal cell carcinoma were studied by electron microscopy. The fine structure of the undifferentiated form exhibited a closer similarity to normal epidermis than to hair matrix or other skin appendages. However, the variant forms did display some degree of pilar (keratotic) and eccrine (adenoid) differentiation. Examples of the so-called cystic variant which were studied appeared to arise from central degeneration of tumor cells rather than sebaceous differentiation. These conclusions are consonant with previously held views concerning the embryology of skin and the developmental potential of the epidermal basal cell. Desmosomes, the ultrastructural analogues of intercellular bridges (prickles), were seen in basal cell carcinoma invalidating the absence of such structures by light microscopy as a diagnostic criterion for this tumor.