Day 9 rat embryos were cultured during the period of cranial neurulation in medium containing 1 mm beta-d-xyloside, a substance which inhibits proteoglycan synthesis while stimulating the synthesis of free chains of chondroitin sulphate. The purpose of this investigation was to elucidate the morphogenetic role of chondroitin sulphate, a component of the neuroepithelial basement membrane and other extracellular regions, and to discover whether it was present in the form of proteoglycan. The histochemical results indicated a great reduction in chondroitin/chondroitin sulphate and in heparan sulphate in the neuroepithelial basement membrane and elsewhere, in beta-D-xyloside-cultured embryos. Ultrastructural studies showed an effect on the structural integrity of the neuroepithelium, with breaks in the basement membrane and abnormal form of apical microfilament bundles. These observations were correlated morphogenetically with failure of the convex neural folds to be converted to flat-concave structures, and to change their epithelial organization from columnar to pseudostratified. Neural crest cell migration was slightly retarded but apparently normal. The results are interpreted as indicating that the sulphated glycosaminoglycans, chondroitin/chondroitin sulphate and heparan sulphate, are present in the form of proteoglycan in the neuroepithelial basement membrane and elsewhere in the cranial region of day 9/day 10 rat embryos, and that they have a morphogenetic function during cranial neurulation.