Three-dimensional models were constructed utilizing the information gained from electron micrographs of serial sections of two clones of cystocytes undergoing their terminal divisions. In each clone a polyfusome connected all eight cystocytes together. Each of the spindles was oriented so that one pole touched the polyfusomes, while the other pointed away from it. This positioning of spindles ensures that one cell of each dividing pair retains all previously formed canals, while the other receives none. The two cells that eventually come to contain the maximum number of canals and fusomal material are the ones that differentiate as pro-oocytes, while the others become nurse cells. The orientation of each spindle suggests that the polyfusome formed at one division determines the placement of the cytoskeletal fibers that anchor the spindles formed at the next division. There is a centripetal gathering together of new canals following each cycle of cystocyte division, which is thought to result from the subsequent contraction of the polyfusomal system. Females homozygous for the otu1 mutation are characterized by ovarian tumors, which result when germarial cystocytes undergo supernumerary divisions and fail to differentiate into either nurse cells or oocytes. An analysis of electron micrographs taken of serially sectioned, mutant germaria showed that most germ cells were single or belonged to clusters of two or three interconnected cells. Therefore otu1 cystocytes are unable to undergo a sustained series of arrested cleavages. These cystocytes contain fusomal material that shows ultrastructural differences from normal polyfusomes. We conclude: 1) that a normal polyfusomal system is a necessary prerequisite for the production of a branched chain of cystocytes and for their subsequent differentiation into pro-oocytes and nurse cells; and 2) that a product encoded by the otu+ gene is essential for the construction of a functional polyfusome.