1. Differentiation in early chick embryo has been studied experimentally using 8-azaguanine. The chemical applied during definitive streak to head process leads to considerable malformations in the developing neural tube and other organs. When it is administered for 3 hours before the definitive streak stage similar abnormalities develop in the embryos. A 6 hours' treatment before the formation of definitive streak leads to almost complete inhibition of differentiation. 2. Azaguanine is not toxic and even in extremely malformed embryos there is no cellular damage as revealed by sections stained with methyl green-pyronine. 3. The effects of azaguanine cannot be reversed by a subsequent treatment with guanosine monophosphate or triphosphate. 4. Incorporation of labelled phenylalanine following treatment with azaguanine is considerably inhibited. 5. In the light of these results it is concluded that azaguanine is incorporated into newly synthesised ribonucleic acid and makes it functionally abnormal.