The general histological organization of Hydra is reviewed and electron microscopic observations are presented which bear upon the nature of the mesoglea, the mode of attachment of the contractile processes of the musculo-epithelial cells, and the cytomorphosis of the cnidoblasts. Particular attention is devoted to the changes in form and distribution of the cytoplasmic organelles in the course of nematocyst formation. The undifferentiated interstitial cell is characterized by a small Golgi complex, few mitochondria, virtual absence of the endoplasmic reticulum, and a cytoplasmic matrix crowded with fine granules presumed to be ribonucleoprotein. These cytological characteristics persist through the early part of the period of interstitial cell proliferation which leads to formation of clusters of cnidoblasts. With the initiation of nematocyst formation in the cnidoblasts, numerous membrane-bounded vesicles appear in their cytoplasm. These later coalesce to form a typical endoplasmic reticulum with associated ribonucleoprotein granules. During the ensuing period of rapid growth of the nematocyst the reticulum becomes very extensive and highly organized. Finally, when the nematocyst has attained its full size, the reticulum breaks up again into isolated vesicles. The Golgi complex remains closely applied to the apical pole of the nematocyst throughout its development and apparently contributes to its enlargement by segregating formative material in vacuoles whose contents are subsequently incorporated in the nematocyst. The elaboration of this complex cell product appears to require the cooperative participation of the endoplasmic reticulum and the Golgi complex. Their respective roles in the formative process are discussed.