The mode of action of the extracts prepared from neem plant i.e., Azadirachta indica on aflatoxin formation in toxigenic Aspergillus species is not well understood. Aflatoxin production by A. parasiticus was suppressed depending on the concentration of the plant aqueous extract (0, 1.56, 3.12, 6.25, 12.5, and 50% v/v) added to the culture media at the time of spore inoculation. Aflatoxin production in fungal mycelia grown for 96 h in culture media containing 50% neem leaf and seed extracts was inhibited by approximately 90 and approximately 65% respectively. Under similar conditions, culture media amended with 1.56% of leaf or seed extract caused approximately 23 and approximately 7% inhibition respectively. Mycelial samples exposed to selected concentrations of the plant extract (1.56 or 50% v/v) collected and processed for morphological studies. Semi-thin longitudinal and cross sections prepared from control (untreated) and treated mycelia (1.56% v/v) revealed that alterations are limited to the vacuolation of the mycelial cytoplasm. Nevertheless, exposure to high concentration i.e., 50% v/v of the extract resulted in vacuolation of the mycelial cytoplasm and vesicle deformation causing attenuation of cell wall at variable intervals. Herniation of the cytoplasmic contents that was protruding from the mycelium was associated with deformation of the mycelium. Some mycelia showed a cleft between the cell wall and cytoplasm. Association of aflatoxin production with morphological changes suggest that probably integrity of the cell barriers particularly cell wall is critical in regulation of aflatoxin production and excretion.