The cellular details of pigment transfer between melanocytes and keratinocytes have been observed in cell cultures of guinea-pig skin. The transfer process in vitro can be divided into the following stages: (1) dendrite introduction; (2) apocopation of the tip of the dendrite; (3) withdrawal of the dendrite; and (4) digestion of the melanin package within the keratinocyte and dispersion of the granules. This study has demonstrated that transfer occurs directly between the two cells and that acidphosphate activity occurs in the region of the melanin package during digestion. It is probable that the melanocyte plays a permissive role in the transfer process and that the keratinocyte acts as a phagocyte. Some factors related to the disruption of the normal transfer process in certain disease states are discussed.