Twenty cysts from five patients with adult polycystic kidney disease were evaluated morphologically by electron microscopy and functionally by cyst fluid chemical analysis in order to correlate the structure with the function of the cyst wall. Thirteen proximal cysts, as defined by cyst fluid/serum sodium ratios of 0.8 to 1.2, were lined by epithelial cells with open or short closed apical junctions that appeared permeable to lanthanum. In contrast, seven distal cysts, as defined by cyst fluid/serum sodium ratios of less than 0.4, were lined by epithelial cells with long closed apical junctions that appeared impermeable to lanthanum. Cell organelles showed no distinction between proximal and distal cysts. Cyst basement membranes appeared abnormal, but there was no consistent pattern. The fluid of proximal cysts contained lower creatinine, potassium, and hydrogen ion, and higher chloride concentrations than did the distal cysts. These studies provide morphologic and chemical evidence consistent with te view that cysts originate from nephrons. Moreover, the maintenance of the epithelial lining and transmembrane solute gradients over many years extending up to and beyond the development of renal insufficiency suggests that the cysts function as nephronsthrughout the life of the patient.