1. Adult dogs maintained for 6 weeks upon a carrot-protein-deficient diet exhibited a progressive fall in the serum protein confined entirely to the albumin fraction. The degree of hypoalbuminemia was pronounced, i.e. a fall from 3.75 to 2.00 gm. per cent. 2. Parallel microscopic changes in the liver were observed which consisted of a gradual loss in the stainable cytoplasm producing extensive vacuolization. This vacuolization was not due to the accumulation of fat or of glycogen as shown by chemical analyses as well as by stained sections of the livers. 3. The histological changes in the livers were assumed to be due to a loss of protein inasmuch as there was a parallel fall in the protein content of the liver pari passu with the fall in the serum albumin of the blood. This assumption is made more probable by the fact that the water content of the liver increased as the protein content decreased. 4. Liver function, as measured by the excretion of iso-iodeikon, fell with the fall of the serum albumin thus indicating the production of hepatic insufficiency by the protein deficient diet. 5. These observations are discussed in relation to the question whether the liver is the site of formation or of storage of serum albumin. Certain other, particularly therapeutic, implications are also discussed, i.e. the importance of a high protein intake in patients with liver disease.