A series of experiments were carried out on 55 guinea pigs in four groups to study the conditions fostering bone resorbin epidermal cysts. The first group had free grafts of canal wall skin applied to the cochlea with and without talc application. The second group had canal skin flaps applied to the cochlea with and without subsequent talc application. The third group had talc applied either to the tympanic membrane or on the cochlea. The fourth group had a canal skin flap inserted into a mucosal pocket in the bulla. The animals were killed three to four months after surgery and the temporal bones were prepared for histology. Epidermal cysts were found at the cochlea in 8 of 55 animals. Cochlear fistulas were found in 6 of 55 animals. The fistulas were associated with epidermal cysts in three cases, otitis media in two cases, and talc granuloma in one case. These experiments show that migrating skin attached to a source of epithelium is capable of inducing bone resorption. Chronic foreign body granulomas and chronic sepsis are also capable of resorbing bone. These three conditions all produce a layer of undifferentiated connective tissue containing chronic inflammatory cells lying against the resorbing bone.