This study presents evidence that the main alteration in scleroderma skin takes place at the level of the subcutaneous tissue. Skin from five normal controls and ten patients with systemic scleroderma were studied. The dermis showed thick collagen bundles, closely packed but with normal staining properties; electron microscopy revealed mature collagen fibrils, arranged in bundles, 700 to 800 Angstroms in diameter with normal periodicity, surrounded by a clear ground substance. The subcutaneous tissue showed marked replacement of fat by hyalinized connective tissue. Electron microscopy revealed (1) fine, immature collagen fibrils, arranged in random fashion, 200 to 400 A in diameter and (2) a massive increase in ground substance. It is suggested that the replacement of the subcutaneous tissue by connective tissue is responsible for the induration of the skin in scleroderma.