The development and mature structure of bacterial leaf nodules in Psychotria bacteriophila were studied by using light and electron microscopy. Bacteria in mucilage surrounding the shoot apex pass through certain stomates in leaf primordia into the substomatal chamber. These chambers enlarge and become nodules as the young leaves grow out of the apical region. Surrounding mesophyll cells grow into each nodule and form a cellular reticulum whose interstices are occupied by bacteria. Each intrusive mesophyll cell wall is unusually thick and continually supplemented by vesicles originating from dictyosomes. The gram-negative bacteria are often surrounded by capsules. Nodule bacteria contain several crystal-like dense bodies. A population of normal, dividing, and degenerating bacteria is found in each nodule. Extensive membranes occur between the bacteria. A hypothesis is proposed to explain certain aspects of this obligate symbiotic relationship.