The ultrastructure of the chlorenchymatous tissues around the vascular bundles of three different types of grass leaves is described. In the temperate grass leaf, as exemplified by wheat, the inner mestom sheath contains proplastids. Normal chloroplasts are found only within the mesophyll cells. Smaller chloroplasts occur in cells of the ill-defined parenchymatic bundle sheath. This type of leaf has the photosynthetic pathway described by Calvin and a high carbon dioxide compensation value. In the tropical grasses,SorghumandAristida, the new photosynthetic pathway proposed by Hatchet al. and low carbon dioxide compensation are correlated with development of the parenchymatic bundle sheath. Cytological evidence indicates that cells of the bundle sheath are much more active than the surrounding mesophyll tissue. The specialized chloroplasts of the bundle sheath cells may be responsible for the physiological and biochemical differences between leaves of tropical and temperate grasses.