The infrapatellar fat pad, fibrous synovium, and cartilage joint surfaces of the tibia, patella, and femur of the knee joints of 17 normal rats and 38 rats with type II collagen-induced arthritis were examined by light and electron microscopy. In the normal animals, the synovium covering the fat pad was structurally variable in that the mesothelium was flattened and two to three cell layers thick in the central region but rounded and three to five layers thick at the tibial and patellar ends. Large vacuoles were more numerous in the synovial cells at either end of the fat pad, and these cells contained less endoplasmic reticulum than those in the central region. The fibrous synovium consisted of a flattened mesothelium composed of cells similar to those found in the central region of the fat pad. The normal cartilage was not covered by a mesothelium. Knees from animals immunized with collagen showed no structural changes until 5 days after immunization, when fibrin could be detected in the synovium by immunofluorescence. By day 12, fibrin deposition was found throughout the synovium covering the fat pad and fibrous tissue, as well as over the cartilage. In addition, hyperplasia of the synovium over the soft tissues was present, and synovial cells extended over the cartilage. On day 19, in approximately 20 per cent of the animals, inflammatory infiltrates, composed of mixtures of polymorphonuclear leukocytes and mononuclear cells, were observed within the synovium covering the soft tissues. Infiltrates were also seen at the edges of the cartilage. When the 80 per cent of the animals that did not have cellular infiltrates were examined 30 days after immunization, neither hyperplasia nor fibrin deposition were seen by light microscopy. By day 45, in 20 per cent of the animals, the synovium was hyperplastic, and granulation tissue, scarring, and granulomata were found in the soft tissues. It is concluded that there are two distinct stages in the development of this synovial disease--the first is characterized by hyperplasia and fibrin deposition, and the second by the presence of inflammatory infiltrates.