Retinal pigment epithelial (RPE) cells were autotransplanted intravitreally in diffusion chambers in rabbit eyes. The RPE cells underwent transformation; first into macrophages, later into spindle-shaped cells with collagen production having epithelial cell characteristics. DNA replication, shown by autoradiography, and loss of pigment granules indicated proliferation of these cells. These results support the hypothesis that RPE proliferation and transformation play a major role in the formation of collagen containing membranes, such as are found in massive periretinal proliferation.