The sheep placenta was studied by electron microscopy at the 20th, 28th, 35th, 67th, 100th and 137th days of gestation. The intercotyledonary zone shows cytological features characteristic of absorptive cells and is involved in the production of binucleate giant cells or diplokaryocytes. Intermediate stages between the columnar trophoblastic cells and the giant cells were observed. The "areolae" overlying the mouths of the uterine glands show marked specialization for absorptive activity. The fine structural features of cotyledonary zone are described and the cryptal epithelium shown to be syncytial in character. The derivation of the cryptal epithelium from the binucleate giant cells is suggested by the cytoplasmic and nuclear similarities between them. Intraepithelial capillaries are also described in the chorionic villi. The fine structure of the binucleate giant cells at different stages in their differentiation and at different levels in the columnar trophoblast or during their transformation into the cryptal syncytium is described. The polarity of these cells with respect to their organelles and cytoplasmic droplets, as described by light microscopy, is confirmed. The components of the "placental barrier" in the intercotyledonary zone and in the placental zone are described on the basis of their fine structural features. The intercotyledonary zone resembles cytologically the rodent sac, and so may be involved in macromolecular transfers, for example the transfer of protein antibodies. The placentomal area seems specialized for a more intimate apposition of maternal and fetal blood streams, and so may be involved primarily in the transfer of gases and diffusible materials of low molecular weight.