The toxic and teratologic effects of caffeine on chick embryos explanted at stages 4-7 and cultured for 19-22 hours were investigated. Caffeine, at 200-300 micrograms/ml, significantly increased the incidence of neural tube defects regardless of the developmental stage at treatment. Concentrations of 500 micrograms/ml or higher inhibited morphogenesis of nearly all organ primordia. In general, the effects of caffeine were concentration dependent and younger embryos were more susceptible to treatment than their older counterparts. Microscopic studies confirmed that the developing neuroepithelium was most sensitive to treatment. Caffeine, at concentrations sufficient to inhibit neural tube closure, caused no apparent alteration in the ultrastructure of cellular components except that apical microfilament bundles were thinner and less conspicuous than usual. Furthermore, caffeine (400 micrograms/ml) selectively inhibited uplifting of neural folds (and hence, closure of the neural tube) in embryos explanted at stage 8 and cultured for 4-6 and 16 hours. Affected neuroepithelial cells lacked the typical bottle-shaped characteristic and folded apical surfaces. Overall results of this study suggest that caffeine causes neural tube defects, at least in part, through its inhibitory action on the contractile activity of apical microfilament bundles in developing neuroepithelial cells.