Cell proliferation in the pannus formation of adjuvant arthritis was studied by autoradiography. It was found that after day 9 an increased cell proliferation starts in the joint capsule recessus and synovial villi on the injected side. From these proliferating cells a pannus, which during the first phase frequently consists only of few cell layers, extends over the cartilage surface. With advancing disease the thickness of the pannus increases and further centripetal growth may cause the entire cartilage surface to be covered. This proliferating pannus tissue may invade the cartilage and destroy it. Since in this area of destruction labelled cells are frequently present, it may be assumed that proliferating cells with a high enzyme content are particularly responsible for the immediate degradation of cartilage. No involvement of chondrocytes in pannus formation was confirmed by the methods employed. There was neither increased proliferation of surface chondrocytes nor increased proliferation of chondrocytes in the depth of cartilage.