This paper considers a quantitative description of intracellular and transmembrane currents in anisotropic muscle, with emphasis on the factors that determine the extracellular potentials. Although Vmax of the intracellular action potential had no relation to changes in conduction velocity in anisotropic tissue with constant membrane properties, the extracellular waveforms were quite sensitive to velocity changes. Large amplitude biphasic deflection occurred in the fast areas, and in the slow areas the waveforms were of lower amplitude and triphasic in shape; i.e., negative potentials preceded the biphasic positive-negative deflection. The extracellular potentials were simulated on the bases of a model of intracellular currents, and the theoretical and measured results showed good agreement. In tissue with anisotropic conductivity, the relationship between the spatial intracellualr potential gradient and the magnitude of the extracellular potential of the excitation wave was opposite to the classical relationship in isotropic tissue. Due to the influence of the effective intracellular conductivity on the spread of intracellular currents and on conduction velocity, in anisotropic tissue the extracellular potential decreased as the intracellular potential gradient increased. The peak values of the positive and negative potentials and the spatial distribution of the potential gradients varied considerably along the activation front. These findings were accounted for by differences in the distribution and spatial extent of the transmembrane currents, which were determined by the intracellular currents. The theoretical analysis showed that intracellular and transmembrane currents were proportional to the local conduction velocities of the wavefront. Thereby, it was not possible to have a "uniform layer" of current when there were differences in conduction velocity along the length of the excitation wave. The implications of the analysis are considerable, since the gratifying agreement between the theoretical and measured results indicates that the details of the extracellular waveforms can be explained on the basis of the distribution of intracellular currents; i.e., extracellular potentials provide a sensitive index of intracellular current flow.