The interstitial cell lineage in mutant strain sf-1 of hydra is temperature sensitive and is lost rapidly from tissue when the animal is cultured at a restrictive temperature of 23 degrees C or higher. The mechanism responsible for this cell elimination process was investigated. Sf-1 polyps were treated at a restrictive temperature of 27 degrees C for varying lengths of time, their tissues were macerated, and the resultant dissociated cells were examined for evidence of phagocytosis after Feulgen staining. It was found that large phagocytic vacuoles were present in the cytoplasm of some epithelial cells. These vacuoles contained partially degraded cells, whose nuclei had highly-condensed and intensely Feulgen-positive chromatin granules. This indicated that, as in colchicine-treated (Campbell, 1976) or starved (Bosch and David, 1984) wild-type hydra, the epithelial cells in strain sf-1 engulfed and disintegrated other cells in the phagocytic vacuoles. The incidence of phagocytosis was higher in sf-1 tissue maintained at elevated temperature than in sf-1 tissue maintained at normal temperature. However, the observed incidence was relatively low (maximally 0.14 phagocytosed cells per epithelial cell) and appeared to be too low to account for the very rapid interstitial cell loss occurring in this strain. We concluded that elimination of the interstitial cell lineage at a restrictive temperature in strain sf-1 takes place in part by phagocytosis and in part by other yet-unidentified mechanisms (cf., Marcum et al., 1980).