The development and maturation of neurotropic WS-N strain of influenza virus in encephalitic mice was shown to occur preferentially along the “free” surface of ependymal and choroid plexus cells where it developed from the cell membrane. Virus maturation and “budding” was generally absent along the other surfaces of the same cells where they were apposed to other cells. This may suggest an inhibitory effect of adjacent cell membranes. Electron microscopic observations of ependymal surfaces may be of importance in demonstrating some viruses in human and animal tissues. Most of the virions were rounded in shape with surface spikes but a considerable number of filamentous forms were seen developing at the tips of villi. Filamentous forms had previously been described in tissue culture but not in animal encephalitic tissues. Intracellular virus within vacuoles was seen en masse and a few virus-like structures appeared to form from endoplasmic reticulum. Intracytoplasmic inclusions were demonstrated. The virus appeared ultrastructurally at a time preceding and overlapping the time at which virus replication reaches its maximum. The electron microscopic results were also considered in relation to immunofluorescence evidence in a companion paper, that virus antigen is present in deeper cells even though few mature virions appear in those sites. The combined data suggests that virus initially has a predilection for ependymal cells where mature virions develop at the surface of the cells. Later there is extension of virus antigen to deeper cells with a presumed transfer from cell to cell without the same degree of maturation of virions at cell surfaces.