Two sisters are described with demonstrable splenomegaly already from infancy and, after the age of 2--4 years, signs of slowly progressive encephalophy, vacuolated lymphocytes in the peripheral blood, and peculiar foam cells in the bone marrow aspirates. The died at 7 3/4 and 6 1/2 years. Widely spread in the brain, the nerve cell bodies were found to show extensive ballooning. It was most striking in the brain stem and spinal cord, while cerebellar structures were remarkably well preserved. The cytoplasm of the ballooned nerve cells was filled with finely granular storage material stainable as a readily soluble glycolipid. The spleen, liver and intestinal wall contained numerous foamy PAS-positive macrophages. Chemical assays showed a ten-fold increase of lactosylceramide and a modest one of minor gangliosides brain cortex. No accumulation sphingomyelin could be revealed, and the sphingomyelinase activity was found to be normal. The ganglioside GM1 beta-galactosidase activity of leucocytes was reduced to 20--25% of normal, which indicated a disturbance of the glycosaminoglycan metabolism. The tissue content of glycosaminoglycans was, however, normal, but an accumulation of lactose was demonstrated in the spleen. It is postulated that the primary enzymic defect is a disturbance of a lysosomal beta-galactosidase with a substrate specificity for lactose and other oligosaccharides with a terminal beta-galactosidic linkage.