The ultrastructural events in myelin degradation in the rat optic nerve following transection have been studied. Myelin debris was found in cells similar to multipotential glia cells (Vaughn and Peters, 1968) as well as in astrocytes and in few oligodendrocytes. The different types of inclusions found during myelin degradation were described in their quantitative relations. Similarities to inclusions described in adrenoleukodystrophy adn multiple sclerosis are discussed. By comparison of the ultrastructural findings with histochemical and biochemical data available a hypothetical model of myelin degradation is presented. The process starts with the degradation of digestible proteins resulting in uniformly layered lipid inclusions. Lipid degradation leads to the formation of unstructured lipid droplets and crystals. During the late stages of Wallerian degeneration numerous polymorph inclusion typed can be found, probably representing poorly digestible lipids or lipoproteins.