The development of estrogen-induced Leydig cell tumors in cryptorchid BALB/c mice was studied with the electron microscope. Changes in Leydig cell fine structure are apparent by 10 days after the s.c. implantation of a pellet of diethylstibestrol (DES). The smooth endoplasmic reticulum is diminished, and there is an increase in lipid droplets and free polysomes as compared with untreated cryptochid controls. These alterations persist as the Leydig cells proliferate to form focal areas of hyperplasia in the interstitial tissue. During this period of proliferation, activated macrophages containing large residual bodies appear among the Leydig cells. If DES treatment is continued for several months, malignant Leydig cell tumors, result. They are characterized by a nuclear and cytoplasmic pleomorphism of the Leydig cells and a decreased macrophage population. Virus-like particles are rarely seen within the cell during the period of tumorigenesis. Along with the reduction in smooth endoplasmic reticulum in the Leydig cells after DES treatment, evidence from the literature suggests that there is also a decrease in testosterone biosynthesis. However, it is not clear whether these two effect are correlated, since the level of the microsomal enzymes of steroid biosynthesis may vary independently of either the amount of smooth endoplasmic reticulum or the level of androgen secretion. The increase in lipid droplets seen in Leydig cells after DES treatment suggest the accumulation of precursors from the steroid biosynthetic pathway. The macrophages are though to represent scavenger cells, rather than a primary tumor cell population. The paucity of virus-like particles within altered Leydig cells implies that formed virus is not a prerequisite for tumorigenesis.