Hematopoietic cells from three siblings of a family with sea-blue histiocytosis were studied using in vitro cell culture techniques, histochemistry, and electron microscopy. Sphingomyelinase activities in cultured fibroblasts derived from these patients averaged 18 per cent of control levels. Ultrastructural examination of the sea-blue histiocytes showed numerous acid phosphatase-containing inclusions with closely packed, concentrically arranged, membrane-like lamellae with a periodicity of approximately 45 A. The inclusions are thought to result from the spatial orientation of complex lipid molecules and water. These structures are consistent with secondary lysosomes and are similar to those seen in some cases of adult Niemann-Pick disease and other cases of sea-blue histiocytosis. Extraction of lipid did not alter the blue-staining characteristics of the histiocytes. Sea-blue histiocytes were seen in liquid bone marrow cultures but did not proliferate, suggesting that the mature sea-blue macrophage is a terminal cell. We propose that partial sphingomyelinase deficiency may be one cause of sea-blud histiocytosis.