Somatostatin-immunoreactive neurons in the rat neostriatum were studied by correlated light and electron microscopy using the peroxidase-antiperoxidase immunocytochemical technique. Immunoreactivity was localized in neuronal perikarya and processes. The perikarya were of spindle or fusiform shape (average length 16.9 microns) and were found in all parts of the neostriatum. From each neuron there arose two to four straight immunoreactive dendritelike processes, which could frequently be traced as far as about 130 microns from their perikaryon. Immunoreactive varicose axonlike processes were occasionally found, some of which were proximal axons of identified immunoreactive cells. Nine of the light microscopically identified neurons showing somatostatin-immunoreactivity were studied in the electron microscope; two of them had proximal axons with varicosities. Each neuron had an oval or elongated nucleus, which was always indented. These morphological features correspond well to those of certain "medium-size aspiny" neurons classified by Golgi studies. Although the immunoreactive endproduct was diffusely located throughout the neuron, it was characteristically located in the saccules and large granules (diameter 133 nm) of the Golgi apparatus, and large immunoreactive vesicles of similar size to those in the Golgi apparatus frequently occurred in all parts of axon. Very little synaptic input was found on the perikarya and dendrites of somatostatin-immunoreactive neurons. The perikarya and proximal dendrites received both symmetrical and asymmetrical synaptic input, while the distal dendrites usually received boutons that formed asymmetrical contacts. The somatostatin-immunoreactive boutons contained pleomorphic electron-lucent vesicles (diameter 39.3 nm) and a few large immunoreactive granular vesicles; these boutons always formed symmetrical synapses. Their postsynaptic targets were dendritic shafts, spines, and unclassified dendritic profiles. On the other hand, the varicosities of identified proximal axons of somatostatin-positive neurons did not form typical synapses, since they lacked clusters of small vesicles, but some of them were in direct apposition (via membrane specializations) to unlabelled perikarya or dendrites. It is concluded that somatostatin is a useful marker for a particular type of neuron in the neostriatum. The presence of somatostatin immunoreactivity in synaptic boutons is consistent with the view that somatostatin could be a neurotransmitter in the neostriatum.