Diphtherial toxin, one of the classical examples of an exotoxin, has been found within the cells of C. diphtheriae. The toxin present in the sonic extracts of well washed diphtherial cells gave positive skin reactions in normal rabbits but no reaction in the skin of rabbits which had been passively immunized with diphtherial antitoxin. The toxic sonic extracts flocculated with standard flocculating diphtherial antitoxin. From these experiments we believe that at least one of the sites of formation of an exotoxin, if not the site of formation, is within the bacterial cell.