The cartilage-synovium junction of knees afflicted with rheumatoid arthritis was observed light microscopically using formalin-fixed, decalcified and immunohistochemically stained tissues. Decalcification had little or no influence on immunoreactivity for lysozyme and S-100 protein. All the specimens had pannus formation, which was classified into four types: A) cellular pannus with homogeneous cell pattern, B) cellular pannus of inflammatory cells, C) fibrous pannus with many fibrous bundles, D) fibrous pannus including round cells with scattered fibrous bundles. Type A pannus may be responsible for extensive cartilage degradation, and may occur at the first stage of pannus formation. Type B pannus may occur afterwards, and may be followed by type C pannus at a later stage. Type D pannus was found in two out of 19 specimens. Round cells in type D were positive for S-100 protein and lysozyme, and were probably chondrocytes. The findings indicated that chondrocytes were responsible for cartilage degradation and pannus formation.