The ganglion of Cephalodiscus gracilis M'Intosh 1882 is entirely intraepithelial and located in the dorsal epidermis immediately behind the tentacular apparatus that is formed by the mesosome (collar). A characteristic feature of the ganglion is a well-developed neuropile in which different types of nerve fibres can be discerned, many of which contain small granules with electron-dense contents. There are no glia-like cells in association with these fibres. Only slender basal processes of epidermal epithelial cells traverse the neuropile. In the depth of the epithelium the neuropile borders the epidermal basal lamina; apically it is covered by a layer of cell bodies, the majority of which belong to what appear to be ordinary ciliated epidermal cells. Besides these epidermal cells the perikarya of two additional types of cells, which are considered to be neurons, can be discerned. One type is characterised by many rough endoplasmic reticulum cisterns and mitochondria, the other by abundant small, electron-dense granules. The nuclei of these cells are comparatively pale and contain a prominent nucleolus. The neuron cell bodies do not form a distinct layer; but they are loosely distributed somewhat deeper than those of the ordinary epidermal cells. They probably send off an apical process to the epidermal surface and a basally directed one into the neuropile. The ganglion has been compared to the nervous systems in cnidarians, some spiralians, and especially other hemichordates, echinoderms, and chordates; it is found to be of primitive rather than degenerate nature. Furthermore, the possible functional significance of its close connection to the food-capturing tentacular apparatus is discussed.