Most theories of basal ganglia functions have been based on a model circuit in which the flow of information follows a one-way loop proceeding from the cerebral cortex to the striatum, the pallidum/nigra, the thalamus, and then returns to the cortex. However, this model neglects data from several studies that show a direct feedback projection from the pallidum to the striatum. In this study, we have examined this feedback connection in the ventral striopallidal system to determine the morphology and chemical properties of ventral pallido-striatal projection neurons and to determine the morphology of ventral pallidal efferents in the ventral striatum. Fluoro Gold was injected into the ventral striatum to retrogradely label ventral pallidal projection neurons. Substance P immunoreactivity was used as a pallidal marker to delineate the ventral pallidum. The results show that most neurons retrogradely labeled by Fluoro Gold lie in the ventral pallidum. Additional double-labeling experiments show that none of these Fluoro Gold-labeled cells are cholinergic neurons; however, some are immunoreactive for parvalbumin, a calcium-binding protein found in many pallidal neurons. Electron microscopy revealed that the somata and dendrites of these labeled ventral pallidal projection neurons form many synapses with unlabeled terminals. Injection of Phaseolus vulgaris-leucoagglutinin into the ventral pallidum anterogradely labeled many fibers in the ventral striatum. Electron microscopy revealed that these labeled axons form both symmetric and asymmetric synapses with ventral striatal neurons. We have thus confirmed that there is a significant direct projection from the ventral pallidum to the ventral striatum. Whether this projection forms a part of either monosynaptic or polysynaptic feedback loops remains to be clarified. Nevertheless, this pallidostriatal projection must be integrated into the theories on basal ganglia functions.