The morphology and the development of the cells in the subependymal layer and of granule cells of the olfactory bulb were examined by Nissl and Golgi staining in postnatal rats. The subependymal layer around the anterior lateral ventricle extends into the center of the olfactory bulb. The mitotic indexes in the subependymal layer are high at the level of the anterior horn of the lateral ventricle and very low inside the olfactory bulb during the first 3 weeks after birth. Golgi-stained subependymal cells are classified into two main groups. One group consists of smoothly contoured bipolar cells with leading processes tipped by large growth cones and with trailing processes. They make up a majority of Golgi-stained subependymal cells during the first 3 weeks of age, and smaller numbers of them continue to exist at 37 and 60 days. They migrate with their growth cones oriented toward the olfactory bulb from the level of the anterior lateral ventricle into the granular layer of the olfactory bulb, where they differentiate into the definitive granule cells: their somata enlarge; the leading processes elongate, branch, sprout many gemmules, and become the peripheral processes; and the trailing processes become the basal dendrites. The other group contains relatively large cells with many cytoplasmic processes that are considered to belong to the glial cell line.