Transmission electron microscopy was used to examine the structure and development of epithallial cells in Corallina officinalis Linnaeus (Corallinoideae), a geniculate alga with an epithallus one functional cell layer thick, and Lithophyllum impressum Foslie (Lithophylloideae), a nongeniculate alga with multicellular epithallial filaments. Lithophyllum provided a particularly good system for unravelling the sequence of epithallial cell differentiation, because different developmental processes were spatially and temporally separated along the length of individual filaments four or five cells long. In C. officinalis, a common wall layer enclosed recently divided initial cells and their epithallial derivatives. Epithallial cells of both species developed prominent ingrowths of the cell wall exclusively on the distal cell surface; those of C. officinalis were branched and penetrated deep into the cell. In L. impressum, even the youngest generation of cells, those borne directly on initial cells, had distal wall ingrowths. Starch was not deposited in epithallial cells of either species, although abundant chloroplasts with extensive photosynthetic membranes were present in most cells. Chloroplasts in penultimate and terminal epithallial cells of L. impressum appeared to undergo dedifferentiation. Eventually, the outermost epithallial cells of both species underwent senescence, and localized deposition of wall material by subtending cells sealed the pit plug connecting the two cells.