1. The relationship between phagocytic leucocyte infiltration and cartilage degradation in immune arthritis has been investigated in groups of normal and neutropenic rabbits. 2. Injection of antigen into the knee joints of sensitized control animals induced joint swelling, prostaglandin E2 (PGE2) synthesis, leucocyte accumulation and proteoglycan loss from articular cartilage. 3. Intravenous injection of nitrogen mustard caused a selective depletion of circulating neutrophils and monocytes with little or no effect on platelets or lymphocytes. In neutropenic animals challenged with antigen, there was virtually no joint swelling, PGE2 synthesis or leucocyte infiltration but cartilage proteoglycan loss was unchanged after 1 day and increased by day 4 compared to control animals. 4. The numbers of circulating leucocytes returned to normal 3-4 days after nitrogen mustard treatment and leucocyte infiltration occurred in antigen-challenged joints but this was not accompanied by joint swelling. Subsequent intra-articular injection of PGE2 did, however, cause swelling. 5. Lysosomal enzyme levels in arthritic joint fluids were measured. The levels of beta-glucuronidase, which is released by activated phagocytes, were decreased in neutropenic animals but the levels of N-acetyl-beta-glucosaminidase, which is a marker of tissue damage, were not changed by neutrophil depletion. 6. Intra-articular injections of the cytokine interleukin-1 (IL-1) induced a pattern of leucocyte infiltration and cartilage proteoglycan loss similar to that seen in immune arthritis. In neutropenic animals, IL-1 did not cause significant accumulation of leucocytes in the joint but the loss of proteoglycan from cartilage was unimpaired. 7. These results indicate that both leucocyte infiltration and prostaglandin synthesis are required for joint swelling but that tissue degradation is mediated by resident cells. It is likely that release of IL-1 by synovial cells stimulates the synthesis and activation of metalloproteinases which initiate the process of tissue degradation.