The ultrastructural distribution of proteoglycans around capillaries growing in the cornea of the rabbit eye was determined after staining with ruthenium red (RR). Proteoglycans were identified by digesting tissues with glycosaminoglycan-degradative enzymes. Sialoglycoproteins were differentiated from proteoglycans by neuraminidase digestion. The capillary sprouts demonstrated a luminal glycocalyx containing testicular hyaluronidase-sensitive proteoglycans but little or no sialoglycoprotein. At the capillary tips, where mitosing and migrating endothelial cells are located, the basal cell surface displayed a network of small RR-stained granules (8 nm in diameter), which was partially removed by streptomyces hyaluronidase but not by testicular hyaluronidase. Thin filaments connected the granules to the endothelial cell plasmalemma and to a similar network of granules that is normally present in the corneal stroma. The stroma granules were partially digested by testicular hyaluronidase. In older capillary regions, where endothelial cells ceased proliferation, the basal network of proteoglycan granules was gradually infiltrated by fibrillar material until a basal lamina was formed. The proteoglycan granules were then arranged on both sides of the lamina densa, and a thin glycocalyx covered the basal endothelial cell surface. Thus, proteoglycans and anionic materials associated with growing capillaries serve to link proliferating and migrating endothelial cells to the extracellular matrix, help to organize the capillary basal lamina, form an anionic surface along the luminal front of capillaries, and probably help stabilize the structure of the capillary wall after proliferation ceases.