Recognition by biopsy of liver allograft rejection has been less successful than diagnosis of rejection of cardiac and kidney allografts. In a study of 138 failed liver allografts, we recognized damage to small interlobular bile ducts by lymphocytes as the most useful indicator of the presence of rejection. This is a report of the electron microscopic features of three patients with unequivocal allograft rejection. Lymphocytes and occasional granulocytes penetrated the epithelia of interlobular bile ducts. Ducts with diameters of 30 to 60 microM were preferentially affected but ducts up to 120 microM were also occasionally involved. Point contacts between infiltrating inflammatory cells and bile duct epithelial cells were observed occasionally. Degenerative changes of bile duct epithelial cells were conspicuous and involved nuclei and cellular organelles. Degeneration was often accompanied by aggregation of dense bundles of filaments in the cytoplasm. In severely affected ducts, epithelial cell disintegration was noted. In all involved bile ducts, the basement membrane was markedly thickened. Hepatocytes were well-preserved but contained lipid vacuoles, pigment granules, and blunted canalicular microvilli. The similarity between these observations and those seen in primary biliary cirrhosis and chronic graft-versus-host disease is striking.