SYNOPSIS. Red chromatophores(erythrophores) of the prawn, Palaemonetes vulgaris, are controlled by pigment—dispersing and -concentrating hormones. Recent experiments on the modes of action of these hormones are described, followed by a theory which satisfactorily explains the data. Red pigment-concentrating hormone is dependent upon sodium ions for a strong response to occur. There is a similar dependency of red pigment—dispersing hormone upon calcium ions. Ouabain inhibits the response to red pigment—concentrating hormone; tetrodotoxin enhances it. Erythrophores with maximally dispersed pigment had a transmembrane potential of 55±15 mv inside negative in one series of experiments and 56±4 mv in another. No appreciable changes in permeability occur when depolarizing and hyperpolarizing currents are passed through a microelectrode within the chromatophore. Red pigmentconcentrating hormone causes hyperpolarization of the transmembrane potential. The magnitude of hyperpolarization is directly related to the degree of pigment concentration. Adenosine 3`;, 5`-monophosphate (cyclic AMP) causes dispersion of the red pigment but has no pigment-concentrating effect. The primary action of red pigmentconcentrating hormone is most likely stimulation of a pump which exchanges sodium ions from inside the chromatophore with potassium ions from the outside, whereas red pigment-dispersing hormone quite likely stimulates entry of calcium ions into the chromatophore.