Chédiak-Higashi syndrome, a rare autosomal recessive disorder occurring in man, beige mice, and other homologues, is characterized by abnormally large lysosomes in many cell types. The formation of these anomalous lysosomes in developing monocytes, neutrophils, and eosinophils in beige mouse bone marrow, as well as lysosomal formation in the corresponding normal cells from C57 Black mice, was investigated by electron microscopy, together with a method for the demonstration of peroxidase activity. Localization of peroxidase reaction product was the same in both C57BL and beige mice. In promonocytes and in neutrophilic and eosinophilic proganulocytes, peroxidase reaction product was localized in lysosomes, in the perinuclear cisternae, all cisternae of the endoplasmic reticulum, and the Golgi succules. In the later stages of development, reaction product was localized only in the lysosomes. In promonocytes and progranulocytes from the C57BL mice, lysosomes apparently form from the inner Golgi succule. Fusion of newly formed lysosomes was occasionally seen. Lysosomal fusion was never observed in the more mature monocytes and eosinophils and was only rarely seen in mature neutrophils. In the beige mouse, lysosomes were formed as in the C57BL mice. However, in the beige mouse, fusion of newly formed lysosomes occurred frequently in promonocytes and neutrophilic progranulocytes. Lysosomal fusion was also frequently observed in the more mature cells. As a result of the continued lysosomal fusion, the mature monocytes, neutrophils, and eosinophils from the beige mouse contained fewer but often greatly enlarged lysosomes.