1. Chemical synaptic transmission develops between individual identified neurones dissected from leech ganglia and maintained in culture. Impulses in Retzius cells give rise to hyperpolarizing synaptic potentials in pressure (P) sensory cells. In suitable medium the potentials develop by 3 days and can be observed for more than 3 weeks. 2. The synaptic potentials occur after a synaptic delay, exhibit facilitation and depression and are reversed by hyperpolarization. The blocking effects of reduced calcium and raised magnesium concentrations in the bathing fluid provide additional evidence for the chemical nature of transmission. 3. An increase in chloride conductance is involved in the generation of the synaptic potential in the P cell. With high intracellular Cl in the post-synaptic cell, the synaptic potentials become reversed and amplified. The amplitudes of these reversed responses range from 1 to 20 mV with a falling phase lasting for seconds. 4. Changes in the membrane potential of the presynaptic cell that modify the amplitude and duration of the action potential influence the efficacy of transmission. In addition, impulses in Retzius cells initiated from hyperpolarized values of membrane potential evoke smaller synaptic potentials in the P cells than impulses arising from a depolarized level. 5. With neurones placed directly next to one another in the dish, maintained depolarization of the presynaptic Retzius cell in the absence of conducted action potentials gives rise to slow synaptic potentials in the P cells. In some pairs, the response in the P cell consists of a marked increase in 'noise'. 6. Injection of horseradish peroxidase into the Retzius cell reveals neurites with distinctive varicosities growing over the P cell.