Studies of host-parasite relationships at the cellular level, using C. albicans and rabbit alveolar macrophages or guinea pig neutrophils are presented. Guinea pig neutrophils killed the intracellular candida cells presumed by the myeloperoxidase-halide-hydrogen peroxide system. Rabbit alveolar macrophages did not kill the intracellular candida cells, although their phagocytic rate was almost comparable to that of neutrophils. Phagocytizing macrophages were eventually destroyed by the intracellular proliferation of candida cells and formation of germ tubes and pseudomycelia. No significant improvement of candidacidal activity was observed with macrophages from normal and immunized rabbits in immune serum. The mode of phagocytosis by macrophages and neutrophils were also studied under the scanning electron microscope.