Serial transverse and horizontal sections of the tail of the 26-day larval lamprey, Lampetra japonica, were observed by light and electron microscopy. The axial structures in the tail of the larval lamprey seem to differentiate from the prospective materials derived individually from the tail bud. The latter consists of two closely adjoined cell populations (C1 and C2). C1 is a small cell cluster located posterior to the other group (C2) and consists of loosely arranged polymorphous cells. The cell cluster extends cranially as a cell sheet on the ventral surface of C2; somites differentiate from this cell sheet. C2 is composed of cells elongated mediolaterally and stacked horizontally to form a compact cell mass which is covered on each lateral surface by a basal lamina. The upper one-third of C2 seems to differentiate into the neural tube, anteceding other axial structures. The middle one-third of C2 seems to develop into the notochord, and the lower one-third into the subchord and the undefined cell cord. The central canal develops in the upper one-third of C2 through the following events: 1) appearance of cilia and a small cavity between adjoining cells; 2) appearance of microvilli in the cavity, in addition to cilia; and 3) development of junctional complexes along the luminal borders of cells surrounding the cavity. Together with these events, cells surrounding the cavity increase in number, acquiring apicobasal polarity and radial arrangement. The cavity itself enlarges by incorporation of periciliary clefts and fusion of cavities with each other to establish the central canal. Near the caudal end of the neural tube, the central canal is directly confluent with the connective-tissue space through an opening in the dorsal wall of the neural tube.