Neuroma formation was induced in rat sciatic nerve by tight ligature. At various times after placement of the ligature, the nerves were excised, desheathed, split longitudinally proximal to the neuroma, and studied in vitro in a nerve chamber. Stimulation of one of the arbitrarily formed proximal branches was found to generate impulse activity in the other branch. Since similar branch to branch activation did not occur in control preparations, it appeared that some form of axon to axon interaction occurred within the neuroma, or alternatively that retrograde regeneration allowed continuity of nerve fibers in proximal divisions of the nerve trunk. Attempts at morphological demonstration of the continuity alternative were made by applying horseradish peroxidase to cut fibers of one proximal division. Although labeled axons did turn retrogradely within the neuroma, they were not found to enter the other nerve division.