In a prospective study of 78 patients with Lyme arthritis, abnormal serum C1q binding activity was present at the initial onset of erythema chronicum migrans in nearly all cases. The abnormal binding persisted in patients with subsequent nerve or heart involvement. In contrast, among those with only subsequent arthritis, it usually disappeared within three months (P = 0.018). However, in the synovial fluid of affected joints, abnormal binding was uniformly present, and always to a greater extent than in the circulation. The abnormally reactive material behaved like antigen-antibody complexes. It had a density of 19S or greater, dissociated below pH 4.2, and lacked antiglobulin activity. Cryoprecipitates containing immunoglobulin were good but insensitive predictors of its presence, but immune complexes themselves did not seem primarily responsible for cryoprecipitability. Thus, as judged by C1q binding, immune complexes remain disseminated in certain patients with Lyme arthritis but localize to joints in others.