Human peripheral blood leukocytes, when cultured in soft agar give rise to giant (100 to 500 micrometer.) "foam cells." Investigation of the origin and properties of the cells proved that they were derived from monocytes in that the cells adherent to glass after 24 hours in culture were phagocytic, elaborated lysozyme and bore receptors for complement and immunoglobulin. The increment in size was accounted for primarily by large inclusions which on histochemical and biochemical analyses were shown to consist predominantly fo neutral fat. Transformation to fat cells took place in the absence of mitosis. Fc receptors were retained but complement receptors were lost. These observations suggest a role for monocytes in the replacement of hematopoietic tissue by fat in certain hypoplastic states. The cultured monocytes may also serve to facilitate the study of fat synthesis and metabolism in vitro.